Meanwhile, foreign investors have already dumped $4 billion in Turkish bonds this year, the most on record, contributing to a 19% decline in the Turkish lira against the USD and pushing up yields on two-year debt two-and-a-half percentage points, the most among major markets.

The central bank is under increased pressure to act in order to assuage market fears and prop up the quickly depreciating lira currency, especially in an uncertain political climate where there is rising risk of a snap election – President Tayyip Erdogan could call for a snap election on August 23 if a coalition government has not formed. The government has been the most vocal about cutting interest rates to stimulate growth.

“After today’s decision, another round of questioning will start on the independence of the central bank,” Isik Okte, a strategist at TEB Invest, told Bloomberg. “With political uncertainties on the rise and Fed rate hike cycle around the corner, this is the last thing Turkey needed.”

iShares MSCI Turkey ETF

For more information on Turkey’s economy, visit our Turkey category.

Max Chen contributed to this article.