The Central Bank hiked its late liquidity window lending rate by 0.50 percentage points on Wednesday and left all other key rates on hold, according to a statement from the bank.
"Late liquidity window interest rates [between 4.00 p.m.-5.00 p.m.]: Borrowing rate has been kept at 0 percent, while lending rate has been increased from 11.75 percent to 12.25 percent," the bank said.
The overnight lending rate -- the rate banks use to borrow from the Central Bank overnight -- was kept at 9.25 percent. The overnight borrowing rate, under which banks lend or deposit money to the Central Bank, also remained unchanged at 7.25 percent.
The one-week repo rate, known as the policy rate, was also kept at 8 percent, the statement said.
The bank said recent data indicates a gradual recovery in economic activity with the back of increasing EU demand for Turkish exports and recovering in domestic demand.
"With the supportive measures and incentives provided recently, economic activity is expected to gain further pace in the forthcoming period. The committee assesses that the implementation of the structural reforms would contribute to the potential growth significantly.
"Cost push pressures and the volatility in food prices in recent months have led to a sharp increase in inflation. Although the recent improvement in the risk appetite contains some of the upside pressures from cost factors, current elevated levels of inflation pose risks on the pricing behavior," the bank added.
The bank said the committee decided to strengthen the monetary tightening in order to contain deterioration in the inflation outlook.
The bank vowed it would continue to use all available instruments in pursuit of its price stability objective.
"Tight stance in monetary policy will be maintained until inflation outlook displays a significant improvement.
"Inflation expectations, pricing behavior and other factors affecting inflation will be closely monitored and, if needed, further monetary tightening will be delivered," the bank said.
