The 1.5 percentage point increase was higher than expected, with analysts having forecast a rise of 0.5 percentage points.
The bank has already raised rates from 5.5% at the start of the year but the moves have failed to combat inflation.
A weak rouble and a ban on western food imports has kept inflation stubbornly high.
"If external conditions improve, and a persistent trend for lowering inflation and inflation expectations emerges, the Bank of Russia will be ready to start to ease its monetary policy," the central bank said.
The new rate will take effect on 5 November. The last rise was imposed at the end of July.
The central bank said that inflation had reached 8.4% and would remain above 8% until the end of March.
Economic growth is expected to almost grind to a halt in the final three months of this year and in the first quarter of 2015.
The rouble briefly firmed after the bank's decision was announced, but then fell back into negative territory.
The rise comes as Russia said it would will resume shipments of natural gas to Ukraine after Kiev makes its first payment for previous supplies next week.
Meanwhile, the European Union said it had launched a trade dispute with Russia at the World Trade Organisation (WTO) to challenge Russia's treatment of European agricultural and manufactured goods.
The WTO said the EU had accused Russia of levying higher-than-permitted tariffs on a range of goods including paper, palm oil and refrigerators.
The dispute is the fifth case involving Russia and the EU that has been brought to the WTO.
Russia's central bank has raised its key interest rate to 9.5% from 8% as it seeks to tackle inflation.