"Accordingly, the Committee has made a decision to implement a strong monetary tightening to support price stability", the monetary policy committee statement said.
Turkish President Recep Tayyip Erdogan has accused the United States of launching what he called a "heinous economic attack" on Turkey after the national currency lira hit a record low following U.S. sanctions.
The Monetary Policy Committee led by Governor Murat Cetinkaya on Thursday increased the one-week repo rate by 625 basis points to 24 per cent, more than the median estimate in a Bloomberg survey that called for a hike of 325 basis points. The bank said further tightening will be delivered if needed.
"Deterioration in the pricing behaviour continues to pose upside risks on the inflation outlook, despite weaker domestic demand conditions", the bank added.
"We can not allow the use of the tool of exploitation that is interest rates", Erdogan told a meeting in Istanbul on Thursday.More news: EU's Juncker wants bigger global role for euro
The lira reacted strongly to the rate rise, initially up 5% in value to 6.0 lira to the USA dollar, later settling up more than 2.7% at 6.15 to the dollar.
Erdogan accused the central bank of failing to control inflation, now standing at 18 percent, and again aired his unorthodox view that low rates bring inflation down.
In another bid to prop up the lira, Erdogan earlier on Thursday ordered by decree that property agreements in foreign currencies would not be allowed.
The bank must balance concerns over slipping growth, which, although a robust 5.2 per cent in the second quarter on an annual comparison, showed signs of weakness with some analysts predicting Turkey is heading for recession.
Its decision came despite Erdogan repeating his opposition to high interest rates earlier in the day, saying high inflation was a result of the central bank's wrong steps.More news: Classic Final Fantasy PlayStation Games Are Coming To Switch
The bank is expected to raise interest rates on September 13.
"Interest rates are the cause, inflation is the result".
The rate rise comes on the same day as the Bank of England left the interest rate untouched at 0.75%, citing heightened risks to global growth as a result of volatility within emerging markets, as well as tensions between the United States and China. "If you say ´inflation is the cause, the rate is the result´, you do not know this business, friend", he added.More news: Assassin's Creed Odyssey Season Pass Includes Assassin's Creed III Remastered