Erdogan has cast the lira crisis as an "economic war" targeting Turkey and has repeatedly urged Turks to sell their dollar savings to shore up the lira.
The Central Bank of the Republic of Turkey (CBRT) raised the rate from 17.75% to 24%, significantly higher than the analysts' consensus of 21%, and in apparent defiance of the president, who has regularly expressed resistance to raising rates.
"Accordingly, the Committee has made a decision to implement a strong monetary tightening to support price stability", it said.
The lira reacted strongly to the decision, rising by five per cent in value to 6.0 lira to the United States dollar.
With Thursday's decision, the ECB's rate on bank overnight deposits, which is now its primary interest rate tool, remains at -0.40 percent.More news: Trump says Puerto storm response ‘unappreciated’
"It was a big surprise to us, but probably to every Turkey-watcher", said Nora Neuteboom, an economist at ABN Amro, saying the move was a "positive signal" with the bank wanting to show its independence and commitment to fight inflation.
"Deterioration in the pricing behavior continues to pose upside risks on the inflation outlook, despite weaker domestic demand conditions", the statement said, adding that "a strong monetary tightening" would be implemented to support price stability.
"Tight stance in monetary policy will be maintained decisively until inflation outlook displays a significant improvement".
In one direction it could hear the siren call of investors craving higher interest rates to draw a line in the inflationary sand and stop the lira's collapse.
He earlier charged the bank with failing to control inflation and again aired his unorthodox view that low rates bring inflation down.More news: Read Jeff Bezos' full statement about his $2 billion Day One fund
Currently, the interest rates are below the annual inflation level in Turkey. "If you say ´inflation is the cause, the rate is the result´, you do not know this business, friend", he added.
The main refinancing rate, which determines the cost of credit in the economy, remained unchanged at 0.00 percent while the rate on the marginal lending facility - the emergency overnight borrowing rate for banks - remains at 0.25 percent. But it still expects to end its 2.6 trillion euro asset purchase scheme by the end of the year, suggesting that a formal decision on ending quantitative easing will come later.
At a Tehran summit on Friday with his Iranian and Russian counterparts, an agreement was reached to use local currencies for trade deals, Anadolu reported, citing Iran's central bank governor Abdolnaser Hemati.
A growing crisis became acute earlier this year following the detention of an American pastor on espionage and terror-related charges, which prompted Donal Trump to double the import tariffs on Turkish steel and aluminium.More news: Hurricane Florence: North Carolina Governor sends STARK WARNING to residents