1 At its meeting on 21 July, the Monetary Council considered the latest economic and financial developments and left the central bank base rate unchanged at 9.50%. In the Council's view, the forint exchange rate continues to be weaker than the level required to meeting the Bank's inflation targets. However, the Council is confident that the Government's commitment to adopting the euro in 2008 and meeting the Maastricht criteria will contribute to rebuilding financial market confidence.

2 The Council welcomes the Government's 16 July announcement of its planned fiscal policy measures to rebalance the economy.

Implementation of the proposed measures will likely create the conditions for an additional reduction in the general government deficit in 2004. This is indispensable for the success of Hungary's European integration.

It should be noted, however, that, in order to restore economic equilibrium, it is necessary to implement the announced action plan in a consistent manner. In addition, fiscal adjustment must continue over the coming years. The expected results will largely depend on future economic developments and economic agents' reactions.

The changes to VAT rates and excise duties, announced for next year, will likely be associated with a one-off rise in prices in a certain range of consumer goods.

3 The Monetary Council is issuing a separate press release dealing with the strategy for the adoption of the euro in Hungary.

4 The Council discussed the conceptual framework of the Bank's Quarterly Report on Inflation, to be published on 18 August.

5 Effective from 7 July 2003, the President of the Republic has appointed Dr Gábor Oblath member of the Monetary Council for a term of six years. Dr Oblath was present at today's Council meeting for the first time since his appointment.