Hungary has reduced its key interest rate by a quarter-point for the third consecutive time to 5.75%, it is the lowest in 20 years as the Magyar Nemzeti Bank policy makers look to revive growth after the worst recession in 18 years.

The two-week deposit rate has been reduced by 3.75 percentage points since July 2009 as a 6.3% economic contraction blunted price pressure in 2009, with economists predicting that the central bank may halt the monetary easing before parliamentary elections in April.

Neil Shearing, a London-based Capital analyst, said: “The timing of future interest rate cuts will be dictated by fluctuations in investor confidence. We think that rates will fall to 5% by the end of the second quarter. More important, we expect rates to remain at record lows over the next eighteen months or so.”

Policy makers had halted rate cuts in the first half of 2009 as the forint had fallen to a record low against the euro, as the country was forced to seek a €20bn International Monetary Fund-led bailout in 2008. As a result Hungary trailed central banks including the US Federal Reserve and the European Central Bank as well as Czech and Polish policy makers in cutting interest rates because of its currency losses.