(Bloomberg) -- Hungary further slowed the pace of cuts to the European Union’s highest key interest rate, with policymakers seeking to anchor the volatile forint in a riskier economic environment. 

The National Bank of Hungary reduced the benchmark interest rate by 50 basis points to 7.75% on Tuesday, matching most forecasts in a Bloomberg survey. The unanimous decision compared with a 75 basis-point reduction in March and a full percentage point cut in February.

A “careful and patient approach” is warranted at a time of greater investor risk aversion, Deputy Governor Barnabas Virag said at a press briefing.

The central bank is looking for a “soft landing” after a more aggressive phase of its monetary-easing cycle that saw the key rate drop from a high of 18% a year ago, Monetary Council member Gyula Pleschinger told Bloomberg on April 12. Risks include a bloated budget, an expected delay in rate cuts by the Federal Reserve, as well as the weakening of the forint, he said.

No Rush

Central bankers target a terminal rate of between 6.5% to 7% by June, in line with a strategy to maintain an adequate premium over inflation to anchor the forint. Traders see less room for cuts, with forward rate agreements pricing only about 70 basis points in further reductions over the next three months.

While the central bank may have room for two more monthly 50 basis-point cuts until it reaches a terminal rate of about 6.75% in June, policymakers are in “no rush” to get there, Virag said.

The forint has weakened 2.6% against euro so far this year, underperforming regional peers such as the Czech koruna, Romanian leu and the Polish zloty.

Policymakers are monitoring the forint’s swings more closely due to its pass-through effect on inflation. The central bank expects price growth to pick up during the course of the year, after slowing to within the tolerance band around their 3% medium-term target in the first quarter.

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