In what analysts predict was the last interest rate reduction albeit the bank has suggested otherwise, Hungary's central bank clipped the benchmark interest rate by 10 basis points to 2.5 percent on Tuesday.
The move was widely anticipated and qualifies as a historic low. Much of the exceedingly low inflation in Hungary is due to government-mandated utility price cuts. The effects will run out next year.
A statement issued by the bank noted that the Hungarian economy still needed help in expanding since industrial output remained below its potential. Unemployment, the bank wrote, was declining but was still higher than the desired level.
Inflationary pressure, it said would remain moderate on medium term, albeit it was expected to rise in 2015. There has also been a slight improvement in Hungary's risk assessment level, it wrote.
With that in mind together with a mild improvement in Hungary's risk assessment, the bank believes there is still room for carefully reducing the interest rate. However, it noted that changes in the domestic and international environments would alter the picture.