The central bank said inflation will come under further pressure.
Erdogan said last week he approved the steps Simsek would take with the central bank, suggesting he had given the green light to rate hikes.
The central bank's key rate remains below deposit rates that reach up to 40% and real rates are still deeply negative.
The central bank's net reserves fell to a record low of negative $5.7 billion last month.
Authorities hope foreign investors and hard currency will return after a years-long exodus, potentially reducing the central bank's need to intervene to keep the lira stable.
Persons:
Tayyip Erdogan's, Hafize Gaye Erkan, Erkan, Erdogan, Mehmet Simsek, Piotr Matys, Ezgi Erkoyun, Ali Kucukgocmen, Christina Fincher, Daren Butler
Organizations:
Reuters Graphics, Wall Street, InTouch, Reuters, Thomson
Locations:
ISTANBUL, Ankara