The lira is going wild after the Turkish central bank defied Erdogan and raised interest rates

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The Turkish flag.

• Turkey's central bank raised the interest rate from 17.75% to 24% on Thursday, beating market forecasts.
• Earlier in the day, Turkish President Erdogan stoked fears that the central bank's independence could be under threat by calling for low interest rates.
• The lira is surging against the dollar as a result, with a swing of 4% from negative to positive.

LONDON - The Turkish lira is surging against the dollar on Thursday after the country's central bank defied the wishes of the president and hiked interest rates.

The Central Bank of the Republic of Turkey (CBRT) raised its benchmark rate of interest from 17.75% to 24%. That beat the market consensus of a hike to 22%, and calmed investor fears that the CBRT wouldn't raise rates at all.

Analysts have been calling for the central bank to raise rates by as much as 10% to combat runaway inflation in Turkey, which is currently running at around 16%.

Earlier in the day, Turkish President Recep Erdogan said he believed Turkey should have low interest rates and called them a "tool of exploitation." Erdogan is ideologically opposed to interest rates and has called them "evil."

The lira has come under sustained pressure over the summer, in part because of fears that Erdogan is exerting greater influence over the CBRT, which is meant to be independent.

Erdogan's comments on Thursday sent the dollar spiking by as much as 3% against the lira. However, the CBRT's decision dramatically reversed this, with the dollar falling by as much as 5% against the lira at one point.

Here's how the dollar looks against the lira roughly ten minutes after the CBRT's decision (remember that when the lira appreciates, the dollar falls):

Markets Insider