(Bloomberg) -- Hungarian inflation, the European Union’s fastest, eased for a third month, bringing the central bank closer to cutting the bloc’s highest key interest rate.

The inflation rate dropped to 24% in April from 25.2% the previous month, lower than the median estimate of 24.1% in a Bloomberg survey. Month-on-month prices increased 0.7%.

Central bank officials will assess the “persistence” of risk improvement in the coming months as they deliberate on when to cut their EU-high 18% key interest rate, Deputy Governor Barnabas Virag said on Tuesday. Investors have largely been split about whether rate cuts may start in May or June.

“Today’s inflation data opens the door wider for interest rate cuts,” ING Groep NV economist Peter Virovacz wrote in a note. “If we see the market completely price in rate cuts in the next two weeks and this doesn’t cause market turbulence then the central bank may start its effective rate cuts already in May.“ 

The forint gained 0.2% against the euro after the data was published, closing in on the strongest level in a year. 

Investors continued to cautiously step up rate-cut bets, with forward rate agreements showing expectations for a 65 basis-point cut within a month. That’s less than the 100 basis-point pace several economists have predicted as the size of monthly cuts once the monetary-easing cycle begins.

Virag has said that the key rate, part of an emergency regime introduced in October to stabilize the country’s currency, may converge with the 13% base rate at some point in the autumn. If risks recede, the level of the base interest rate is sufficient to rein in inflation, according to the central bank.

With a deepening recession, forint appreciation and lower energy costs have slowed inflation this year, there’s “a good chance” inflation can decelerate to single digits by end-year, Virag said.

Inflation may drop to 9.3% by December, Laszlo Bencsik, the deputy Chief Executive Officer at OTP Bank Nyrt., Hungary’s largest lender, told reporters on Wednesday. ING’s Virovacz forecasts average annual inflation of 19% this year and said the threat that price-growth gets stuck at high levels was a concern.

The government has introduced compulsory price reductions at supermarkets, along with caps on the cost of food staples. The central bank has criticized some of these measures, saying they interfere with free markets and ultimately exacerbate inflation.

Food prices were unchanged on the month in April but surged almost an annual 38% in April while household energy costs increased almost 42%, according to the statistics office.

--With assistance from Mark Sweetman.

(Updates with analyst comment in fourth paragraph, markets in fifth and sixth, OTP deputy CEO in ninth.)

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