Turkey's central bank increased all of its key interest rates in dramatic fashion at an emergency midnight policy meeting.

The bank ignored opposition from Prime Minister Tayyip Erdogan as it battles to defend the country's crumbling lira currency.        

It raised its overnight lending rate to 12% from 7.75%, its one-week repo rate to 10% from 4.5%, and its overnight borrowing rate to 8% from 3.5% - all sharper moves than forecast.
A Reuters poll of 31 economists on Monday found a consensus pointing to a 2.25 percentage-point rise in the lending rate. Only one forecast a move this dramatic.

The boldness of the actions stunned investors, sending the lira sharply higher and stirring hopes it would short-circuit a vicious cycle of selling in emerging markets. Asian markets rallied amid a broad revival in risk appetite.

The lira has gained almost 4% since last night and almost 10% from Monday's record low - its biggest surge in five years.
Erdogan, keen to maintain economic growth ahead of an election cycle starting in two months, has been a vociferous opponent of higher borrowing costs, railing against what he describes as an "interest rate lobby" of speculators seeking to stifle growth and undermine the economy.
"I would like you to know that as always, I am against a hike in interest rates today," the prime minister told reporters late last night, hours before the central bank's meeting.
"But of course I don't have the authority to interfere with the central bank. They are responsible for anything that could arise," he added, emphasising the bank's independence.
The central bank had been struggling to contain the lira's precipitous slide, with investor confidence damaged by a corruption scandal shaking the government and the global impact of a cut in US monetary stimulus.
Reluctant until now to make an outright rate hike, it had instead tried to defend the currency by burning through its foreign currency reserves and trying to squeeze up borrowing costs on the margins - a battle it had clearly been losing and one which it has now decisively abandoned.
In a statement, the bank said it would maintain tight monetary policy until the inflation outlook showed a clear improvement. That could have a marked impact on Turkey's growth, which the government has forecast at 4% this year.
Turkey's problems have been exacerbated by a sharp global emerging selloff in recent days. In a sign of how closely investors are watching worldwide, US stock futures rallied in late trade after the Turkish central bank's move, even though a policy decision is due from the Federal Reserve later tonight.
Yet much of the pressure on Turkey is of its own making.
Erdogan has overseen strong economic growth since coming to power in 2002, transforming Turkey's reputation after a series of unstable coalition governments in the 1990s ran into repeated balance of payments problems and economic crises.
But his increasingly authoritarian style - from a heavy-handed police crackdown on street protests last summer to his reaction to the corruption investigation in recent weeks - has started to unnerve investors.
The graft scandal, which triggered the resignation of three government ministers and the detention of businessmen close to Erdogan, has grown into one of the biggest challenges of his 11 years at the helm, just as he prepares for local elections in March and a presidential race he is expected to contest five months later.
His reaction, purging the police force of thousands of officers and seeking tighter control over the courts, has been criticised by the European Union and raised investor concern over the rule of law and independence of state institutions.
It was not clear whether Erdogan, who left on an official visit to Iran before the rate announcement, was informed in advance of its decision.