File Photo: A view of the entrance to the National Bank of Hungary building in Budapest,Hungary. REUTERS
Central banks around the world have launched a series of rate increases as Russia's war in Ukraine has fuelled a surge in energy and food prices that has driven up inflation.
Hungary's central bank began even earlier, raising borrowing costs last year for the first time in a decade to fight inflation and steady the forint, which has been plunging against the euro.
But Tuesday's hike was the heftiest since 2008, going up by 185 basis points to 7.75 percent. Analysts had forecast a 50-basis-point increase.
The central European nation's monetary authority said its "primary objective" was "to achieve and maintain price stability".
"The protracted Russia-Ukraine war has led to a general deterioration in the global economic outlook," the central bank (MNB) said in a statement.
Hungarian inflation hit 10.7 percent in May, the first double figure reached in 20 years, despite a range of price caps fixed by Prime Minister Viktor Orban.
Last month Orban also blamed the "sanctions policy in Brussels" for stoking inflation before levying windfall taxes on the banking, energy, and airline sectors among others.
Orban, who was reelected for a fourth straight term in April, said the taxes would partly fund the price caps.