The National Bank of Hungary (NBH) slashed the top of its interest rate corridor by 100 basis points today, as expected.
This clears the way for the fourth successive cut in its key one-day deposit rate as it unwinds emergency hikes.
The bank lowered the top of its rate corridor to 16.5% from 17.5%.
But it left the base rate unchanged at 13%, the European Union's highest level, as unanimously forecast in a Reuters poll last week.
Since becoming the first central bank in the EU to start lowering interest rates in May, the NBH has telegraphed the impending reduction in its one-day deposit rate by first cutting the ceiling of its rate corridor the same day.
The bank's one-day rate became the effective benchmark rate in October 2022, when the NBH sharply raised borrowing costs to rein in the forint from record lows against the euro.
Since May, it has slashed the one-day deposit rate by a combined 300 bps to 15%.
"Although the Hungarian currency has exhibited sensitivity to global developments, it has remained stable enough to handle an additional 100bp cut of one-day deposit rate to 14%," economists at Erste Group said in a note.
Analysts expect the bank to align its one-day deposit rate with the 13% base rate in September.
Investors will closely follow any rate guidance for clues on whether the NBH forges ahead with cuts in its base rate after September to help the recession-hit economy or slows the pace of easing, with inflation still uncomfortably high.
Hungary's annual inflation slowed to 17.6% in July and is expected to be single-digit by October-November, the government has said.
However, rampant inflation has hammered consumption as real wages fell this year, despite hefty wage hikes.
