Hungary's fiscal and monetary authorities should continue to work together to ensure that inflation is reduced to the lowest level possible, Finance Minister Mihaly Varga told a business conference on Wednesday.

The National Bank of Hungary (NBH) cut its key one-day deposit rate by another 100 basis points to 16% on Tuesday to ease the burden on the stagnating economy, as the European Union's highest inflation rate slows and the forint has gained.

Headline inflation in May fell more than expected to 21.5% year-on-year, easing for a fourth straight month. But the economy slowed sharply as borrowing was stifled by high rates. The NBH targets headline inflation in the 2% to 4% range.

"My personal view is that inflation destroys and slams the brakes on economic growth," Varga said. "The most important goal remains that monetary and fiscal policies should wrestle down inflation to the lowest level possible."

In an apparent rebuke to Economic Development Minister Marton Nagy, who has recently suggested that setting a higher inflation target may help the economy, Varga said there must be no compromise in curbing price growth.

Nagy, a former central bank Deputy Governor, who has put pressure on the bank to start lowering interest rates, said Hungarian inflation may not return to the 2-4% target range but stay on a higher single-digit path.

"There are of course siren voices surfacing in times like this ... but this is not the right path," Varga said. "The job must be done. In western Europe and the U.S., inflation rates are approaching the desired range and it is in our essential interest that this decline manifests here as well."

On Tuesday the NBH said inflation could return into its target range only in early 2025. (Reporting by Gergely Szakacs; Editing by Conor Humphries)