Central Bank of the Republic of Turkey (CBRT) raised interest rates Tuesday for the first time this year, effectively bolstering the Turkish lira in a bid to contain inflation.

The Monetary Policy Committee announced it kept the policy rate unchanged, the one-week repo rate at 8 percent, but changed the late liquidity window interest rates. The borrowing rate was kept at zero percent while the lending rate was increased by 75 basis points, from 12.75 percent to 13.50 percent.

The committee also kept the marginal funding and overnight borrowing rates constant at 9.25 and 7.25 percent, respectively.

The Turkish lira strengthened 1 percent to 4.0475 against dollar by 2:02 p.m on Wednesday.

Elaborating on the decision, Enver Erkan, an economist at Istanbul-based GCM, said the central bank went beyond expectations by increasing the late liquidity window rate 75 basis points.

"Thus, the central bank went ahead of the markets and added further tightening. It did not change its tight monetary policy stance and continued to focus on inflation," he added.

In fact, the central bank did not give up on inflation rhetoric and predicates its interest rate increase to the "higher levels of inflation and inflation expectations that continue to pose a risk overpricing behavior," as noted in its policy statement, Erkan said.

He also added that the CBRT is taking into account deterioration that the continuation of the depreciation in the Turkish lira could cause for inflation expectations.

Erkan also pointed to the "additional tightening" statements by Murat Çetinkaya, the governor of the central bank, in his latest speeches, signaling that the bank will closely monitor pricing behaviors and their effects on inflation expectations.

"Recently released data indicates that economic activity maintains its strength," the central bank said. Domestic demand continues to expand and external demand contributes positively to exports.

"Current elevated levels of inflation and inflation expectations continue to pose risks on pricing behavior," it said, noting that an upward movement in import prices had increased such risks and the committee decided to implement a measured monetary tightening to support price stability.

According to the country's statistical authority, the Turkish Statistical Institute (TurkStat), last month consumer prices in Turkey rose 10.23 percent year-on-year, marking a slight decrease of 0.03 percentage points compared with figures from February.

"The central bank will continue to use all available instruments in pursuit of the price stability objective," the CBRT said in a statement. "A tight stance in monetary policy will be maintained decisively until the inflation outlook shows significant improvement, independent of base effects and temporary factors, and becomes consistent with the targets."

"Inflation expectations, pricing behavior and other factors affecting inflation will be closely monitored and, if needed, further monetary tightening will be delivered," the bank added.

Wednesday's Monetary Policy Committee meeting is the third of eight meetings scheduled for the year. At the first meeting on Jan. 18 and the second meeting on March 7, the CBRT kept the interest rates unchanged.

According to the central bank's program, the next Monetary Policy Committee meetings will be held on June 7, July 24, Sept. 13, Oct. 25 and Dec. 13.