Torn between an angry Prime Minister railing against an interest rate hike and punitive markets baying for a rise, Turkish Central Bank Governor Erdem Basci opted for a bold increase in rates that has stunned investors.

On Tuesday morning, he faced a front-page headline ‘Stand firm, don’t raise’ in Yeni Safak, a paper close to the government, ahead of an emergency policy meeting, called as the lira plunged to unprecedented lows. A few hours later, he calmly fielded questions from critical international analysts and the press, insisting the central bank had the resources and strategy to overcome the biggest bout of volatility in Turkey’s markets in a decade.

And shortly after that, the 47-year-old risked Prime Minister Tayyip Erdogan’s wrath, putting up interest rates dramatically in a move that spurred the lira to its biggest jump in five years and boosted investors’ hope that a cycle of selling in emerging markets may have been short-circuited.

In one of the world’s most unorthodox policy mixes, the bank had been battling to support the weak lira with foreign exchange auctions, liquidity adjustments and verbal intervention while avoiding outright rate hikes.

Erdogan’s government has condemned rate increases as pandering to an “interest rate lobby” of foreign investors and harmful to economic growth, creating a political climate in which those calling for rate hikes are left feeling like enemies of the state. But yesterday, Basci was being congratulated for bold action that also averted a domino crisis in emerging markets.

“The policy response to severe financial stability risks was punchy, aggressive and credible. An amazing job overall,” said economist Benoit Anne at Société Générale.

“The Central Bank of Turkey is now back in the game after going through a few tough weeks during which its credibility was heavily challenged by emerging market investors.”

Alarmed investors have fled Turkish assets as a high-level graft case engulfed figures close to the government, hastening an exit that followed curbs in US monetary stimulus.

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