ISTANBUL: The Turkish lira weakened as much as 2.8% to a fresh record low early on Friday, extending losses as the central bank’s large rate hike a day earlier, reversing President Tayyip Erdogan’s policy, fell short of market expectations.

The lira last traded at 25.2015, some 1.3% weaker than Thursday’s close. At its weakest point of 25.59 it was nearly 27% weaker against the U.S. currency this year.

Turkey’s central bank raised its key rate by a hefty 650 basis points to 15% on Thursday and said it would go further in its first meeting under new Governor Hafize Gaye Erkan, who was appointed by Erdogan after his election victory last month.

Turkish lira down 7% in biggest selloff since 2021 crisis

The move marked a change in course after years of monetary easing in which the one-week repo rate had been cut to 8.5% from 19% in 2021 in an unorthodox policy pursued despite soaring inflation.

The median estimate in a Reuters poll had been for rates to rise to 21% on Thursday and analysts said the smaller move suggested Erkan might have limited room to aggressively tackle inflation under Erdogan’s watch.