Turkey's Central Bank raises late liquidity window interest rates from 13.50 to 16.50 percent.
The Turkish Central Bank on Wednesday announced an increase on late liquidity window interest rates by three percentage points.
The borrowing rate was kept at 0 percent while the lending rate was increased from 13.50 to 16.50 percent.
"Current elevated levels of inflation and inflation expectations continue to pose risks on the pricing behaviour," the bank said in the statement.
"Accordingly, the committee decided to implement a strong monetary tightening to support price stability," it said. "The Central Bank will continue to use all available instruments in pursuit of the price stability objective."
The bank's move came after the US dollar/Turkish lira exchange rate hit a historic high on Wednesday, climbing to around 4.93. Following the bank's decision, the dollar/lira rate fell below 4.60.
At the beginning of the year, the USD/TRY rate was 3.78 while the average rate was 3.65 in 2017.
The Central Bank kept its policy rate – the one-week repo rate – constant at 8 percent while the marginal funding and overnight borrowing rates were kept constant at 9.25 and 7.25 percent, respectively.
TRT World's Turkey analyst Yusuf Erim explains.
"Tight stance in monetary policy will be maintained decisively until inflation outlook displays a significant improvement," the bank added.
Following the bank's decision on interest rates, Turkish Deputy Prime Minister Mehmet Simsek – responsible for the economy – said on social media it was time to restore monetary policy credibility and regain investor confidence.
"The government is committed to maintaining fiscal discipline and accelerating structural reforms [including macroprudential measures] to reduce the current account deficit and help the Central Bank's disinflation efforts," he said.
Simsek added that the Turkish Central Bank governor and members of the monetary policy committee have his full backing in doing what is necessary to stem the slide of the lira and achieve price stability.
"None of Turkey’s macroeconomic problems are insurmountable," he said. "We have fixed problems in the past, we can do it again."
Earlier on Wednesday, the country's economy minister Nihat Zeybekci also said Turkey had authorised institutions to take necessary steps for maintaining the value of lira against foreign currencies.
"It's impossible to say that the recent fluctuations in the foreign exchange rates are correlated to Turkey's macroeconomic figures," he said. "Thus, we say that this [upward movement in forex rates] is speculative."