Turkey's central bank has aggressively raised its key interest rates in a dramatic move to stem a steep drop in the country's lira currency.
The lira perked up after the shock decision, which comes amid the Turkish regime's most damaging political crisis in a decade and went against Prime Minister Recep Tayyip Erdogan's recommendation.
The central bank hiked its overnight lending rate to 12 per cent from 7.75 per cent, the overnight borrowing rate from 3.5 per cent to 8 per cent, and one-week repo rate to 10 per cent from 4.5 per cent.
The lira strengthened after the crisis meeting to 2.17 against the dollar from 2.25 before the announcement.
"Recent domestic and external developments are having an adverse impact on risk perceptions, leading to a significant depreciation in the Turkish lira and a pronounced increase in the risk premium," the bank said in a statement posted on its website at midnight.
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"The central Bank will implement necessary measures at its disposal to contain the negative impact of these developments on inflation and macroeconomic stability," it added.
The bank said it decided to implement a "strong monetary tightening and to simplify the operational framework".
Analysts said the decision was a "turning point" that went "beyond expectations".
They said the decision would bring fresh credibility to the bank after months of inaction raised questions about its independence from Erdogan.
The central bank "left nobody in doubt on Tuesday night when they hiked interest rates," Gillian Edgeworth, economist at UniCredit Research, said in a statement.
"Following the turmoil of the past few weeks, tonight's meeting probably had to deliver two things in order to stabilise Turkish financial markets," Neil Shearing, chief emerging markets economist at the London-based Capital Economics, said in a statement.
