ISTANBUL—The Turkish lira fell sharply after the country’s central bank defied expectations by keeping interest rates on hold, stoking concerns about President Recep Tayyip Erdogan’s influence over monetary policy at a crucial time for the economy.
In its first monetary-policy decision since Mr. Erdogan won re-election last month and inherited vastly expanded executive powers, the central bank left its main rate unchanged at 17.75%. Many analysts had anticipated a rise of at least a percentage point to combat inflation, which...