- friendly fiscal policy. the central bank ’ s responsibility is to contribute to the creation of a more stable economic environment through price stability and by the reduction in uncertainties that stem from inflation. global price increases one of the determining tendencies of the world economy currently is the growing prices of food, oil and other raw materials. what we know for sure is that the prices of these products are increasing relative to that of other products and services that enter into international trade. these commodities are characterised by the fact that they appear directly in the consumer basket, and also serve as input in the production process, especially in the case of oil. there are several, not mutually exclusive explanations that can account for the global increase in the prices of these goods. these include a temporary spike in prices, long - term structural factors or a global inflationary pressure. one - off factors such as bad weather, temporary capacity limits and speculation have contributed to the former. the sustained change in relative prices may be caused by long - lasting structural factors leading to a shift in demand and / or supply relations. in the case of food prices, these include growing demand in emerging countries and subsidy schemes supporting the production of biofuels. the observed changes in these prices may also reflect a global inflationary pressure. in this case, what we are seeing is not a change in relative prices but the dynamics of food, oil and raw material prices reacting to a positive global output gap, which could be an early symptom of a mounting global inflationary pressure. this is because the price of unprocessed food and crude oil is typically set on auction - like markets, where prices adjust rapidly and in a more flexible way, whereas the prices of other globally traded goods are more rigid, thus they react more sluggishly. today it seems increasingly likely that oil and raw materials will remain more expensive than they were a couple of years, or even months ago. what remains to be seen is whether we are only facing a relative price change or whether this tendency is a harbinger of broader global inflationary pressure affecting the widest range of goods and services. what can be achieved through monetary policy in a small, open economy in order to meet these challenges? as i mentioned previously, the task of monetary policy - makers is to set an interest rate path which ensures that the inflation target is achieved with the least possible economic sacrifices. global financial turbulence has so far caused only limited increase in risk premia in hungary. the banking system ’

of monetary policy, decisions made by a body are more effective than those made by individuals as the members can deal with the information more effectively and can represent more aspects jointly. at the same time, the marginal utility derived from increasing the number of members beyond a certain point falls quickly, indeed may become negative, as in a large organisation agreeing positions becomes exceptionally complicated and time - consuming ; beyond a certain level there is no opportunity to find a consensus acceptable to everyone. this is why i believe that in the long term it is necessary to reduce the number of members of the monetary council. as we have also heard, in a country the size of hungary with a nonfederal system, a 5 to 7 member monetary council is thought to be optimal. x. another important aspect regarding the efficient and predictable operation of the monetary council is continuity. one way to promote this is for the members of the monetary council to change gradually over several years. it would be practical to implant this into hungarian practice by changing at most 1 or 2 members each year. xi. last but not least, at the central bank, as in every organisation, a balance needs to be created between corporate and individual decisions and responsibilities. while approval of strategic decisions is more fortunate when made by a body, one body making a decision whose implementation encroaches on the competence of another body within the institution needs to be avoided. it is more efficient if in the area of implementing corporate decisions and in the direction of everyday work individual responsibility is placed in the foreground. xii. clarifying the goals, accountability and an efficient decision - making structure. these are the conditions that produce the appropriate institutional framework for the efficient and predictable running of the central bank, and efficient co - operation with the government. i believe that the lessons of our conference today will find support in both legislation and in government circles as an efficiently working monetary policy facilitates the ability to plan and achieve budgetary targets, and helps the hungarian economy meet the prerequisites for acceding to the eurozone as speedily and at the price of as few sacrifices as possible. thank you for your kind attention. goodbye.