( CNN ) -- After three weeks of punishing losses to its currency the lira , Turkey 's central bank has taken what is being viewed as decisive action to reverse negative sentiment . At an emergency meeting Tuesday , the country 's main interest rate was raised by 4.25 percent to 12 percent . `` A hike in interest rates was necessary . And it needed to be decisive and credible and it was , '' explains Marios Maratheftis , Global Head of Macro Research for Standard Chartered Bank . `` The decision exceeded market expectations and in my opinion it absolutely had to . '' Central bankers in the most vulnerable emerging market economies are being forced into action . The Reserve Bank of India raised the country 's key interest rate by a quarter percentage point to 8 percent this week . South Africa 's central bank followed suit Wednesday . Their actions come as the U.S. Federal Reserve 's policy making group will decide this week whether to trim another $ 10 billion in bond purchases as it continues to unwind stimulus support . The initial response was positive : investors pushed up equity markets and emerging market currencies Wednesday , starting in southeast Asia . The interest rate hikes by the bigger emerging markets are seen as an effort to plug severe leaks in a monetary dike which threatened to drain reserves that were being used to defend their currencies . Economist Nouriel Roubini , speaking at the CNN emerging market roundtable at the World Economic Forum in Davos last week , described what we are witnessing as a perfect mini-storm which is being driven by the Federal Reserve , rising inflation , a slowdown in China 's manufacturing sector and large current account deficits in a handful of developing countries . Argentina was the trigger point last week due to high spending and a sudden lifting of currency controls . Now investors have moved on to focus their attention on what Morgan Stanley has called the Fragile Five : Brazil , Indonesia , India , South Africa and Turkey . They share a common economic DNA of large deficits , slowing growth and vulnerable currencies . South Africa 's finance minister Pravin Gordhan told me during a recent interview that the investment bank certainly has not done these economies any favors by marking them out last autumn . After a decade of blistering growth , emerging markets have had a severe , albeit delayed , fall from grace after the western-led global financial crisis that started in 2008 . Brazil is growing at less than a third of its 2010 rate of 7.5 percent , Russia at less than half and the same for Turkey . As the global sell-off triggered by Argentina unfolded last Friday , Ali Babacan , Turkey 's Deputy Prime Minister in charge of economic policy said : `` What 's happening in Turkey mostly is a repricing process not only just because of the U.S. Fed 's tapering but also recent political events have triggered some market volatility . '' 2014 will be a challenging year on the political front . There are elections in each of the Fragile Five countries , which will just add to uncertainty . As a result , concerns remain that governments will try to resist taking any action that will curtail growth as voters prepare to go to the polls . Ongoing protests in Ukraine and Thailand have only added to a heightened sense of fragility in the developing world , where the rising middle classes in the developing world do not hesitate to take to the streets in their calls for change or solutions to their problems . A great deal has changed from the past financial crises in Asia and Latin America during the past two decades . With a couple of glaring exceptions , notably Argentina and Venezuela , most emerging market governments are trying to exercise greater discipline on macro economic policy and limiting their exposure to short term , dollar-denominated debt . Let 's see if market takes that into account as the U.S. central bank continues to change course .
Central bankers in vulnerable emerging market economies are taking action . This seen as an effort to plug severe gaps which threaten to destroy reserves . Brazil , Indonesia , India , South Africa and Turkey are the focus of investor efforts .