"Great decision - made all the more hard by the huge pressure on the central bank from Erdogan", said Bluebay Asset Management LLC strategist Tim Ash. The independence of monetary policy has been in doubt since Erdogan pledged in his election campaign this year to take on a greater role to bring interest rates lower.
He also criticised Turkey's central bank, accusing it of failing to control inflation and urging it to cut interest rates just hours ahead of a its announcement that it was raising rates to 24%.
The lira reacted strongly to the decision, rising by 5% in value to six lira to the USA dollar.
There had been indications from the bank that it would raise rates after inflation came in at almost 18 per cent in August, according to official data last week.
"Accordingly, the Committee has made a decision to implement a strong monetary tightening to support price stability", it added, explaining the hike.
"Deterioration in the pricing behaviour continues to pose upside risks on the inflation outlook, despite weaker domestic demand conditions", it said.
Before today's interest rate decision, Mr Erdogan announced he was banning the use of foreign currencies in property sales, rental contracts and leasing transactions and ruled all such transactions must now be made in lira. "If you say "inflation is the cause, the rate is the result", you do not know this business, friend", he added.
He's delivered on that pledge, ousting the old guard of policy makers who'd guided the economy since 2002 and giving himself the sole authority to make appointments at the central bank and other state organizations.
The bank implemented what economists described as a hidden interest rate hike in mid-August, forcing banks to borrow at the higher 19.25 per cent through the overnight lending facility.
The fall in the value of the lira in recent months has pushed up the price of everyday items in Turkey and raised fears the country is sliding into an economic crisis. Berat Albayrak, his son-in-law and treasury minister, will be his deputy and the fund's management staff have all been replaced.