"Inflation indeed must be kept in check and must be lowered," Orban told a news conference. "If inflation is higher we cannot lower interest rates - and we need lower interest rates."

"The inflation target must not be raised and I warn everyone not to write anything like that," he said when asked whether reports that the government eyed a higher inflation target to allow looser monetary policy were true. "That is not true."

He also said that impending changes to the central bank's rate-setting Monetary Council must not involve doing anythinig radical, adding that the changes would probably have a beneficial effect on the country's forint currency.

He added he supported the Economy Minister's proposal on Friday to create a 250 billion forint ($1.26 billion) stability reserve fund in the 2011 budget in order to avoid negative effects of potential market volatility in Europe.