Turkey's central bank has raised its key interest rate sharply, from 17.75 per cent to 24 per cent, to contain inflation and stem the currency crisis that has been destabilising the country.
The bank's move is long overdue, many independent economists say, and suggests it is re-asserting its independence after President Recep Tayyip Erdogan repeatedly and publicly pushed it to keep rates low.
The Turkish lira began to recover shortly after Thursday's rate hike, strengthening by 3.4 per cent to 6.18 against the dollar.
Read Next The currency has plunged in recent months and even after Thursday's rise was down almost 39 per cent against the dollar this year.
Investors are mainly concerned about Erdogan's economic policies and an ongoing diplomatic and trade dispute with the US over the detention of an American pastor on espionage and terror-related charges.
Washington imposed sanctions on two government ministers and doubled tariffs on steel and aluminium imports from Turkey.
Turkey's woes are also part of wider jitters in developing countries as investors pull their money out of the fast-growing - but often fragile - emerging economies to return it to safer markets like the US.
In a statement, the central bank noted that the local economy is weakening and inflation is rising.
The rate hike could pinch growth more, but experts say it's needed to contain inflation of around 18 per cent and support the currency.
The central bank said it would keep high rates until inflation eases.
Just two hours before the central bank's announcement, Erdogan repeated his belief that interest rates should be cut, calling them an "instrument for exploitation".
In a bid to shore up the Turkish lira, Erdogan's government issued a decree on Thursday banning the use of foreign currency in the sale and renting of property and the leasing of vehicles.
According to the decree, all sales and rental contracts agreed in foreign currency will be converted to Turkish lira.