The rate-setting monetary council of the National Bank of Hungary cut its benchmark interest rate by 25 base points to 5.25 percent on Tuesday in a move widely anticipated by the market.

This was the seventh straight 25-base-point decline in the interest rate, bringing it down from 7 percent in August to the lowest it has been since November 2010, at the last Monetary Council meeting presided over by bank governor Andras Simor, whose six-year term of office expires this weekend.

Simor has been opposed to the rate cuts fearing that they would lead to a rise in inflation, but has been a minority on the council after the government appointed four members loyal to its point of view.

The monetary council issued a statement saying the central bank's inflationary targets would be attained even if monetary conditions were more relaxed. The benchmark rate, it continued, could continue to go down as long as expected medium-term inflation stayed at 3 percent and money market conditions remained favorable.

The Hungarian forint has remained comparatively steady, at 225.11 against the U.S. dollar and 294.63 against the euro, rates that have weakened slightly over past weeks, but are not yet a cause for concern, according to analysts.

Prime Minister Viktor Orban has said he would not make the name of Simor's successor public until Friday, three days before the new bank governor takes office.

While it is widely expected that Orban will name National Economy Minister Gyorgy Matolcsy for the post and has delayed his announcement to keep a skittish market from an extended response, whoever he chooses is anticipated to alter monetary policy in hopes of stimulating business lending and growth in a recession-plagued economy.

The Orban-led Fidesz administration has been dissatisfied with Simor's conservative approach and earlier this month called for a more "daring" use of "unorthodox monetary policy tools."

Xinhua