(Bloomberg) -- Hungary more than tripled the pace of its base interest increase after the forint’s plunge forced policy makers to reverse their plan to slow the pace of monetary tightening. The currency jumped.

The central bank raised the base interest rate by 185 basis points to 7.75% on Tuesday. That beat all expectations as economists in a Bloomberg survey had a median projection of 50 basis basis points.

After the surprise decision, the benchmark surpasses the one-week deposit rate, becoming the effective rate for the first time since last November. The forint, which hit a low against the euro on Monday at 404.76, gained more than 1% after the central bank decision. 

“It’s a decisive hike in response to the rise in core inflation and the weakness of the forint,” Marek Drimal, a strategist at Societe Generale SA in London, said after the decision. He said the central bank is likely to continue with “rapid rate hikes.” 

EU Standoff

The Hungarian currency has repeatedly fallen to record lows after breaching the 400 per-euro level for the first time two weeks ago. Investors sold the currency following the central bank’s signals that it wants to slow its tightening to avoid having rates climb alongside inflation into the double digits.

Markets, which had already been on edge during a global rout fueled by inflation concerns and the fallout from Russia’s war on Ukraine, were also spooked by Hungary’s continued standoff with the European Union, which is holding up the disbursement of billions of euros in funding.

Just a month earlier, Deputy Governor Barnabas Virag had signaled a slower pace of hikes -- to 50 basis points in the base rate and 30 basis points in the one-week facility. He’s set to hold an online briefing at 3 p.m. in Budapest.

At the briefing, he is also expected to comment on the monetary-policy outlook, the same time when the central bank publishes in post-decision statement and its latest inflation forecasts.

(Adds quote from analyst, details from first paragraph.)

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