The lira is down 38% against the dollar this year despite Thursday's slim gain.
He earlier charged the bank with failing to control inflation and again aired his unorthodox view that low rates bring inflation down.
"There could be extraordinary and must-do investments, that's another issue, but apart from this, we will start looking [at investments]", Erdoğan said.
"We believe this is shown in the relatively "mild" TRY appreciation, when comparing to a surprisingly high rate hike of 625bp", stated Nordea Bank.More news: Ryan Thomas crowned the victor of Celebrity Big Brother
The yield on the government's 10-year lira bonds fell on Friday to a six-week low, and stocks gained along with the lira. The yen weakened 0.2 percent to 111.47 per dollar on the soothing trade noises.
The interest rate decision was eagerly awaited.
Erdogan was referring to a recent surge in USD/TRY rate which he has said was as an economic attack by the Trump administration under a pretext of an ongoing legal case involving a US citizen with strong suspected links to terrorist activities targeting Turkey's peace and stability.
In such a scenario, the bank would raise the other two rates of the interest-rate corridor: the overnight lending rate and late liquidity window (LLW) rate.More news: Mother, infant, among several killed by Hurricane Florence
Turkey has a long tradition of carrying out business in foreign currencies to mitigate the threat of inflation and a falling lira.
"This became once the coolest decision", commented Timothy Ash, senior rising markets strategist at Bluebay Asset Administration. Many of his government's own contracts, including for building motorways and operating airports, are now priced in dollars or euros.
But analysts say the move will not be enough to quickly erase global investors' concerns, as the country has fundamental economic problems, such as a high level of debt owed in foreign currencies that has grown in size as the lira has fallen. The government has yet to clarify the new rules.
The measure will create "total chaos" and is probably impossible to implement within the time frame allotted, according to Hulusi Belgu, head of the Turkish shopping malls investors association.
"Anyone who is not involved in exports or imports shouldn't see his path intersect with foreign currencies", the president said.More news: Gary Neville hits back at dig from Jürgen Klopp on Twitter
"Accordingly, the Committee has chose to implement a strong monetary tightening to support price stability", the committee´s statement said. Facing a deep slide in the lira and a steep run higher in inflation, the central bank felt compelled to lift rates to restore investor confidence-a risky gambit that boosted the lira but could further damage the economy.