Turkish Central Bank's Monetary Policy Committee has decided to raise the one-week repo rate, also known as the bank's policy rate, by 1.25 percentage points, the bank said on Thursday.
In a statement, the bank said the policy rate had been increased from 16.5percent to 17.75 percent.
Following the bank's decision, U.S. dollar/Turkish lira exchange rate slipped to 4.4700, compared to Thursday's market opening at 4.5730.
Elevated levels of inflation and its expectations continue to pose risks on the pricing behavior despite the mild outlook for demand conditions, the bank noted.
The country's annual inflation rate was 12.15 percent in May, up from 10.85 percent in April, according to the Turkish Statistical Institute on June 4.
“Accordingly, the committee decided to further strengthen the monetary tightening to support price stability,” the statement read.
The bank will use all its instruments for its main purpose of price stability, it said.
In recent months, the Turkish lira has been losing ground to the U.S. dollar. The USD/TRY rate has risen more than 20 percent since the beginning of this year.
In May, the U.S. dollar/Turkish lira exchange rate hit a historic high of around 4.93, versus 3.78 at the beginning of 2018, while last year's average rate was 3.65.
By Tuba Sahin