The International Monetary Fund said on Friday that Turkey’s monetary easing has “gone too far.”
“He called on Ankara to ensure that fiscal policy remains a major cornerstone of the policies.
The central government budget deficit widened this year as Ankara boosted spending in the wake of a currency crisis that sent the country into recession.
In September, Ankara revised its forecast for the 2019 budget deficit to 125 billion pounds ($ 21 billion) from 80.6 billion pounds previously.
“While the recent fiscal stimulus helped the economy recover, the underlying deficit increased significantly. Managers recommend a broadly neutral fiscal position in 2020,” the IMF said in an evaluation of its executive board, adding that “a modest reduction” would be necessary for the debt to remain. The year is down.
The Turkish Central Bank has cut the key interest rate by 12 percentage points since July, after President Recep Tayyip Erdogan dismissed the former governor of the bank because of his failure to comply with his demands to cut interest rates.
“Given the continuing high inflation expectations, managers stress the need for monetary policy to focus on sustainable low inflation, which will help to lower interest rates permanently. In this context, they note that the easing of monetary policy in the recent period has gone too far,” the fund said. “
The independence of the Turkish Central Bank has long been a cause of concern for investors, given Erdogan’s support for the idea that high interest rates are fueling inflation.
The International Monetary Fund called for a clear monetary and intervention policy to enhance transparency and the credibility of the central bank.
(USD = 5.9575 Turkish Liras)