Based on the favourable macroeconomic situation of Hungary, the Monetary Council has decided to lower the central bank base rate by 25 basis points, from 9.75 % to 9.5 %. The decision will take effect from 8 January 2002. Despite unfavourable external conditions, the Hungarian economy grew at a robust pace in 2001, and there was a decrease in both the budget deficit and the balance of payments deficit. Inflation declined at an especially rapid rate. The exchange rate of the forint has appeared to be strong and stable during the period since the previous sessions of the Council, which increases the likelihood that the inflation target for end-2002 will be achieved.

The Council discussed considerations relating to the optimal level of international reserves. It regarded the current level of foreign exchange reserves as being satisfactory and their management in the course of 2001 as successful. The level of the reserves will continue to remain sufficient in 2002 even in the face of the agreement between the central bank and the government to renew, in forint terms, the foreign exchange debt of the Hungarian state maturing in the course of 2002. The level of the reserves is managed by the National Bank of Hungary in line with Hungary's prevailing foreign trade situation and the country's accession process to Economic and Monetary Union.