Turkey's embattled lira on Wednesday lost over three percent in value to hit new historic lows against the U.S. dollar, but there was no word from the central bank of any emergency action to buttress the currency.
The Turkish lira regained some of its value after the bank's monetary policy committee held an emergency meeting and announced it was raising the rate from 13.5 percent to 16.5 percent.
"The central bank has to act fast, there is a perception amongst investors and the public. that the government is leaving things to their own and is reluctant to intervene", said economic analyst Enver Erkan.
"Accordingly, the committee chose to implement a strong monetary tightening to support price stability", it added, according to BBC.
Simsek added that the Turkish Central Bank governor and members of the monetary policy committee have his full backing in doing what is necessary to stem the slide of the lira and achieve price stability.
The decline, exacerbated by stop-loss selling by Japanese retail investors overnight, brings the lira's losses to more than 20 percent so far this year and puts it on track for its worst monthly performance since the 2008 financial crisis.
Turkey's currency lira has fallen to an all-time low against the US dollar amid fears of economic instability as the country heads toward crucial elections next month.
The US Dollar will continue to rise as long as EM currencies continue to look "untouchable", says Chris Turner, head of FX at ING Bank.
Speaking to investors, Erdoğan repeated his unorthodox view that interest rates should be cut, despite high inflation, while vowing to take more responsibility for monetary policy if he wins the June 24 snap presidential election.
During a speech in the Presidential Complex in Ankara, Erdogan linked the currency fluctuations to global factors, saying it is not in line with the economic realities of Turkey.
FILE PHOTO: Turkish Lira banknotes are seen in this October 10, 2017 picture illustration.
The continued depreciation of the Turkish currency would increase the chances of an emergency and substantial rate hike, said William Jackson, an emerging-market economist at Capital Economics, an economic research company.
The currency is now trading at 4.8 per dollar, with pressure on the central bank to hike interest rates as the lira goes into free-fall.
Over the past month alone the lira has lost 18 percent of its value compared to the dollar. Following the bank's decision, the dollar/lira rate fell steeply to below 4.60.
"I think markets are beginning to take fright at the extent of government interference over certainly central bank policy", he said.
Win Thin, Global Head of Emerging Market Currency Strategy at Brown Brothers Harriman in NY, said Wednesday's increase was the "bare minimum", and something closer to 20 percent in the top rate would be needed to calm the lira.