Turkey's Central Bank on Thursday raised its one-week repo rate – also known as the bank's policy rate – by 200 basis points.

The bank's policy rate rose from 8.25% to 10.25% to restore the disinflation process and support price stability, said the bank.

The decision was announced in a statement following the bank's eighth Monetary Policy Committee (MCP) meeting this year.

Noting that inflation had taken a higher-than-envisaged path driven by fast economic recovery with strong credit momentum, and financial market developments, the bank said it decided to reinforce tightening steps taken since August to contain inflation expectations and risks to the inflation outlook.

The bank underlined the importance of maintaining a sustained disinflation process for achieving lower sovereign risk, lower long-term interest rates, and stronger economic recovery.

Turkey’s "monetary stance will be determined by considering the indicators of the underlying inflation trend to ensure the continuation of the disinflation process," it noted.

In its last three consecutive meetings, the bank kept the rate constant at 8.25%, following a gradual cut of 375 basis points from 12% over the preceding months.

Last year, in eight meetings, the bank cut the rate by a total of 1,200 basis points from 24%.

After holding eight meetings last year, this year the bank boosted the number of MPC meetings to 12.

The move surprised the market, as a panel of 23 economists surveyed by Anadolu Agency on Monday forecast the bank would hold interest rates steady, with just four predicting an increase, ranging between 0.50 and 1.50 percentage points.