Turkey's Central Bank decided on Thursday to hike its benchmark one-week repo interest rate to 24 percent from 17.75 percent.
A rate hike with 625 basis points was higher than expected. The Turkish currency lira strengthened to 6.01 against the U.S. dollar from 6.45 following the decision.
The bank announced the decision in a statement after its Monetary Policy Committee meeting, vowing "to continue to use all available instruments in pursuit of the price stability."
"Deterioration in the pricing behaviour continues to pose upside risks on the inflation outlook, despite weaker domestic demand conditions," said the statement.
Tight stance in monetary policy will be maintained decisively until inflation outlook displays a significant improvement, it added.
Early on Thursday, President Recep Tayyip Erdogan said that Turkey will take further action to prevent fluctuation in foreign exchange rates and "struggle against all issues affecting the economy without getting outside the boundaries of the free market system."
Turkish economy has been hit by a serious currency tumble and also a soaring inflation, which reached nearly 18 percent in July.
The lira has lost some 40 percent of its value against the dollar since the beginning of this year. Last year, the average USD/TRY rate was 3.65 while one dollar traded for 3.02 lira on average in 2016.
Turkish central bank is under pressure to stabilize the lira in order to contain a market rout and a declining investor sentiment.
