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Statement on the Monetary Council session of 10 September 2001

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1. At its session of 10 September, the Monetary Council passed a decision on reducing the central bank base rate by 25 basis points to 11.00%, with immediate effect from 10 September 2001. The level of central bank rates tied to the base rate will change accordingly.

Stronger-than-expected slowdown in economic growth within the European Union is expected to affect the Hungarian economy during the second half of the year. This economic slowdown will go hand in hand with lower inflation. Furthermore, economic analysts' expectations have also come closer to the targets set by the National Bank. These developments are conducive to meeting the inflation target for 2002 and increase the probability that at end-2001 price increases will be in the range of 7 to 8%, as projected by the central bank. The above considerations have led the Bank to follow the European Central Bank and cut its rates. Thus, the interest premium on the forint has remained unchanged.

2. On reviewing recent economic and financial developments, the Monetary Council stated that during the first seven months of 2001, the external balance, and especially the current account of the balance of payments, had been more favourable than expected.

3. The Monetary Council reviewed the tasks associated with the storage, distribution and manufacture of forint notes and coins in the run-up to the Hungarian introduction of the euro, and formulated related guidelines.

MONETARY COUNCIL OF THE NATIONAL BANK OF HUNGARY