(Bloomberg) -- Hungary is poised to further slow 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 central bank will reduce the benchmark interest rate by 50 basis points to 7.75% on Tuesday, according to 25 out 26 forecasts in a Bloomberg survey. That compares with a 75 basis-point reduction in March and a full percentage point cut in February. The central bank will announce its decision at 2 p.m. in Budapest, followed by a statement and briefing an hour later.

Policymakers are 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%, 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.

Read more: Hungary’s Budget Overrun Triggers Credit Warning from Fitch

Central bankers are targeting 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.

The forint has weakened 2.8% against euro so far this year, underperforming regional peers such as the Czech koruna, Romanian leu and the Polish zloty. 

Policymakers are monitoring the 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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