Treasury and Finance Minister Mehmet Şimşek Friday reiterated the Türkiye's commitment to curb price increases and ensure financial stability, a day after the central bank hiked its key policy rate for the first time in over two years.

The central bank raised its one-week repo rate by a hefty 650 basis points to 15% on Thursday, marking a change in course after two years of monetary easing in which the key policy rate had been cut to 8.5% from 19% in 2021.

Addressing reporters in Ankara, Şimşek, who is highly regarded by financial markets, said: "The path toward price stability is going to be gradual but steadfast."

"Our economic policies aim to achieve price stability and financial stability in the short term," Şimşek said before departing for Istanbul. "We are determined to reach these objectives."

The central bank said it would go further "in a timely and gradual manner" after its first meeting under the new Governor Hafize Gaye Erkan, whom President Recep Tayyip Erdoğan appointed after his election victory last month.

The bank's monetary policy committee said the tightening "will be further strengthened as much as needed ... until a significant improvement in the inflation outlook is achieved."

Annual inflation eased to below 40% in May after touching a 24-year high of above 85% in October last year. The central bank said inflation will come under further pressure.

In his comments last week, Erdoğan said he approved the steps Şimşek would undertake in coordination with the central bank, suggesting he had given the green light to rate hikes to combat inflation.

"As stated in the central bank's announcement yesterday, this is a process," said Şimşek. "We will manage this process gradually and with determination."

In his remarks after the rate hike on Thursday, the minister said predictable economic policies based on the market economy, a free exchange rate regime and an inflation-targeting model would enable capital inflows and stabilize the Turkish lira.

Price stability and financial stability-oriented monetary policy will also support the implementation of economic policies, Şimşek said on Twitter.

The lira weakened as much as 3.3% to a record low of 25.74 against the U.S. dollar at 10.06 GMT on Friday, after the rate hike fell short of market expectations of a larger initial tightening.

The currency is down some 27.3% this year and was trading at 25.6480 at 1039 GMT.