ISTANBUL: Turkey's President Tayyip Erdogan said on Friday that the central bank's 475-point interest rate hike a day earlier was a bitter pill to be taken in order to lower inflation, which has been stuck near 12pc all year.

"We are aware that we need to take some bitter pills if needed at this stage. I evaluate yesterday's interest rate hike decision in this framework," he said.

Speaking to business leaders in Istanbul, Erdogan also said he believed declining inflation will stabilise the currency and repeated his unorthodox economic view that interest rates are the cause of inflation.

"Our real target is to first bring down inflation to single digits as soon as possible, then to the levels in our medium-term targets and to ensure that interest rates come down in line with this," the president said.

Turkey's central bank hiked its key rate to 15pc and pledged to remain tough on inflation on Thursday, meeting lofty expectations and boosting the lira under the newly appointed governor Naci Agbal.

The rate hike was the sharpest in more than two years and could support the lira after it hit a series of record lows since the summer, though it could also slow an economic recovery from coronavirus fallout.

In his speech, Erdogan also called for domestic investors to bring savings back from abroad and from under the mattresses in order to boost the economy.