Turkey's economy has been in trouble since Mr Erdogan swept to a fourth term in office in a victory that handed him greater powers including more influence on the country's monetary policy.
It said: "Accordingly, the committee has made a decision to implement a strong monetary tightening to support price stability". "Deterioration in the pricing behavior continues to pose upside risks on the inflation outlook, despite weaker domestic demand conditions", the statement said, adding that "a strong monetary tightening" would be implemented to support price stability.
Turkey is banning the use of foreign currencies in the country's property market as it looks to stem the dramatic fall of its own currency, the lira.
Erdogan, a self-styled "an enemy of interest rates", has cast the lira crisis as an "economic war" targeting Turkey and has repeatedly urged Turks to sell their dollar savings to shore up the lira.
In a speech to a traders' confederation in the capital, Ankara, Mr Erdogan said on Thursday that nobody should carry out business in foreign currency apart from exporters and importers.
The dollar/lira exchange rate fell 6.3512 by around 14.30 local time (1130 GMT), down 1 percent.
But economists and industry participants doubted the move would have a permanent positive impact, saying it hampered predictability and was likely to bring additional burdens for firms with foreign currency debt.
"Such hasty decisions would not have a positive impact on the Turkey perception of foreigners either", he added.