"Current elevated levels of inflation and inflation expectations continue to pose risks on the pricing behaviour", the bank said in the statement.
"Accordingly, the committee chose to implement a strong monetary tightening to support price stability", it added.
"The exchange rate fluctuations are due to global factors and are not related to Turkey alone", Erdogan said in a meeting with former lawmakers during an iftar (fast-breaking) meal in Ankara. "The central bank governor and members of the monetary policy committee have my full backing in doing what's necessary to stem the slide in lira and achieve price stability", he wrote.
"Tight stance in monetary policy will be maintained decisively until inflation outlook displays a significant improvement", the bank added.
The central bank, which uses a corridor of rates as part of its monetary policy, said it had increased the upper rate to 16.5% from 13.5%.
Official data also showed recently that the inflation climbed to nearly 11 percent in April, stoked by the lira's fall against the US dollar.
The exchange rate of lira against dollar has fallen about 20 percent from 3.78 at the beginning of this year.
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"[If the central bank] continues to bow to pressure from Erdogan and refrains from raising interest rates, that would lead to an even sharper fall in the currency", Jason Tuvey, an economist with Capital Economics in London, told AP.
Muharrem Ince, the main opposition party's candidate, who is challenging Erdogan at the June 24 presidential race, called on the Turkish leader to stop interfering in the central bank's monetary policy and to ease concerns over fiscal discipline, warning that the "economy is about to hit the wall".
The Istanbul bourse said it was taking measures to convert its foreign exchange assets to lira to "fight speculative actions aimed at creating a negative image of Turkey", but it was unclear if this would have any impact on the currency.
The bank's move came after the United States dollar/Turkish lira exchange rate hit a historic high on Wednesday, climbing to around 4.93.
He has also made statements that fly in the face of economic orthodoxy, describing interest rates as the "mother and father of all evil" and saying low interest rates help keep down inflation.
With the bank and its chairman Murat Cetinkaya silent for the past week, he said the central bank needs also to act to "shore up its own credibility" with markets questioning whether it will "be able to take action". "But the relief has often proved short-lived", he said.