BUDAPEST (AFP) -- Hungarian 12-month inflation edged higher to 8.6 percent in June from 8.5 percent in May, the central statistics bureau said, contradicting an upbeat inflation assessment of the central bank.

Consumer prices rose on average by 0.4 percent in June from May levels, and averaged 8.6 percent in the first half of the year, bureau KSH said. The data appeared to undermine the optimism of the central bank, which cited "the easing of uncertainty about inflationary expectations" when it lowered the country's key interest rate last month by a quarter of a point to 7.75 percent. The interest rate cut -- the first since October of 2006 – had surprised analysts, who had urged the bank to hold rates steady because of a slower than expected pace of inflation reduction. Inflation has climbed steadily since June of last year, when 12-month inflation was only 2.8 percent, to a peak of 9.0 percent in March of this year. The high inflation mostly reflects tax rises and big cuts in state subsidies for household energy, which were implemented to rein in the public deficit, the highest in the European Union at 9.2 percent of economic output last year. The central bank forecasts 2007 inflation to average 7.3 percent, followed by 3.6 percent in 2008. Average inflation was 3.9 percent in 2006