Hungary's central bank cut its base rate by another 25 basis points to 5.25 percent, the bank's seventh rate reduction since last August.
The National Bank of Hungary, which has cut rates by 175 basis points since August 2012, said the new rate would take effect from Feb. 27.
Last month the central bank said it would only consider further rate cuts if the outlook for inflation was in line with the bank's inflation target and the improved sentiment in financial markets was sustained.
The bank's president, Andras Simor, who will be stepping down at the end of this month, has consistently opposed rate cuts but has been outvoted each month since August by members of the monetary council that were appointed by the ruling political party.
One of Simor's deputies will also be leaving next month and another in July, reinforcing expectations that rates will continue to be cut.
Hungary's Gross Domestic Product contracted by 0.9 percent in the fourth quarter from the third, the fourth quarterly contraction in a row, for an annual drop of 2.7 percent, up from the third quarter's annual decline of 1.5 percent.
The inflation rate fell to 3.7 percent in January, down from December's 5.0 percent but still above the central bank's 3.0 percent target.