(Bloomberg) -- Hungary slowed the pace of interest-rate cuts following a drop in the forint and said there was limited room left in its more than yearlong monetary-easing cycle. 

The currency rebounded after the National Bank of Hungary cut the benchmark rate by a quarter point on Tuesday to 7%, matching the median estimate in a Bloomberg survey of economists. That compares with a half-point cut in April and May. The forint made further gains after the central bank said there remained limited room for easing given a multitude of risks, which warrant a “cautious” approach.

“Monetary policy is entering a new era from June,” Deputy Governor Barnabas Virag said at a briefing. “The central bank will have more limited room for cutting the benchmark rate in this period.”

The Hungarian currency slid more than 2% against the euro over the past month, prompting policymakers to slow the size of base-rate reductions. The key interest rate peaked at 18% before the easing cycle kicked in.

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The forint reversed the day’s losses after the announcement, gaining 0.4% against the euro by 4:50 p.m. in Budapest. 

Hungarian monetary policy must navigate volatility in global markets, a bumpy disinflation path as well uncertainty over rate policy at major central banks, according to a post-decision statement. The monetary authority refrained from giving an exact guidance on its future steps, saying the rate-cut room had to be evaluated each month.

A pause in the easing cycle and small cuts may be considered from next month, Virag said.

While the inflation outlook improved over the past quarter, the expected rise of the annual core inflation rate to 5% by year-end is putting Hungary’s central bank on alert, Virag said. Core inflation strips out volatile food and energy price swings. Headline inflation is expected to hover around 4%, the top end of policymakers’ tolerance band around their 3% medium term inflation target, broadly as projected earlier.

Annual price growth accelerated to 4% in May from 3.7% in April, less than the 4.2% median estimate in a Bloomberg survey. Virag said last month that he didn’t expect disinflation to return until the start of next year.

(Recasts with comments from statement, briefing throughout)

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