The Central Bank of Turkey increased its benchmark interest rate on Thursday to 24 percent, a hike of 625 basis points from the previous rate of 17.75 percent. The Turkish lira jumped more than 2 percent on the news, firming to around 6.1 against the dollar.
The move, which exceeded market expectations of an increase of between 300 and 400 basis points, boosted the lira and saw Turkish sovereign dollar bonds gain across the curve to their highest level since the end of August. The lira touched as high as 6.0030 against the dollar immediately following the announcement.
The rate hike came alongside a pledge by the bank to enact strong monetary tightening in order to support price stability amid recent economic turbulence.
"If needed, further monetary tightening will be delivered," the bank said in a statement.
The last few months have been nothing short of a roller coaster ride for Turkish assets, which have seen a massive sell-off thanks to investor fears over the central bank's independence and a diplomatic fight between Turkish President Recep Erdogan and Washington. The lira has fallen some 40 percent in value against the dollar since the year's start, prompting fears of contagion amid a wider emerging markets shakeup.