Hungary's central bank cut its base rate for the third month in a row by 25 basis points to 6.25 percent, a move that was expected by some economists.
The Magyar Nemzeti Bank said in brief statement that the new two-week deposit rate would take effect on Oct. 31. The overnight central bank deposit rate will be 5.25 percent and the rate on overnight collateralised loans will be 7.25 percent.
The central bank will issue a statement later, explaining its policy decision.
The central bank has been cutting rates this year, so far by 75 basis points, despite a rise in inflation to fight of recession.
The inflation rate rose to 6.6 percent in September, the highest since mid-2008, from 6.0 percent in August. The central bank targets inflation of 3 percent.
But Hungary's economy contracted by 0.2 percent in the second quarter from the first, following a quarterly contraction of 1.04 percent in the first quarter, leaving the year-on-year contraction of 1.3 percent in the second quarter.
Last month the central bank said it expected inflation to remain above 3 percent for some time and only decline to its target in the second half of 2014.