The Turkish central bank raised its benchmark interest rate by 625 basis points (6.25%) on Thursday, pushing the lira to rise against the dollar and the euro by about 3%. The decision comes despite Turkish President Recep Tayyip Erdogan's renewed criticism of interest rates.
Turkey's central bank raised its repo rate for a week from 17.75% to 24%, meaning that it has raised interest rates by 11.25 percentage points since late April in an effort to stop the lira decline.
Following the decision of the Turkish Central Bank, the lira rose to 6.01 lira per dollar from a level of more than 6.4176 before the decision.
Analysts had previously expected the bank to raise interest rates to counter inflation, which reached about 18 percent. The value of the local currency has fallen by about 40 percent since the beginning of this year.
The central bank said in a statement it had decided to apply a tight monetary policy strongly to support price stability. "If necessary, monetary policy will be tightened further," he said.
In remarks on Thursday ahead of a meeting of the Central Bank, the Turkish President Recep Tayyip Erdogan that his position on the issue of interest has not changed, but the Central Bank remains independent and make its own decisions.
Erdogan criticized Turkey's high interest rate, saying that "the government will never contribute to support this exploitative trend."
He expressed his belief that the high inflation in Turkey was the result of wrong steps taken by the Central Bank.