8 July 2002

The Monetary Council has reviewed economic and financial developments. In its view, the recent weakening of the forint's exchange rate has also been due to an increase in the risk premium required by international investors, in addition to the factors indicated in previous releases.

Prompted by the evolution of the exchange rate and acceleration of economic growth expected for the latter half of 2002 and for 2003, the Council decided to tighten rates to prevent inflation exceeding 4.5% at end-2003. Accordingly, the Council raised the central bank base rate by 50 basis points from 9.00% to 9.50%, with effect from 9 July 2002.