Turkey's central bank slowed the pace of interest rate hikes on Thursday, a move that further exposes local assets to a sell-off as inflation still lingers around 40 percent.

The Monetary Policy Committee headed by Governor Hafizeh Gaye Erkan raised the weekly repo rate to 17.5% from 15%. Analysts surveyed by Bloomberg, unanimous in predicting an increase, differed in their forecasts, with the average estimate suggesting an increase to 18.5%.

The lira rose very briefly, but then immediately hit a new low after the Central Bank decision was announced. Now it is trying to rise again, but it is still trading with a loss of 0.46% since the beginning of the day against the dollar.

The decision reduces the pace of rate hikes, which began after Erkan's appointment last month, as part of a tightening cycle the central bank calls "gradual."