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Turkish central bank needs to be ‘fully independent,’ IMF’s Europe director says

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Economic and political developments in Turkey have had investors worried for more than a year now.

Turkish President Recep Tayyip Erdogan has espoused keeping interest rates down despite rising inflation, currently at more than 19 percent. Investors fear he will continue to pursue populist monetary policy after his party suffered unprecedented defeat in local elections last month, the results of which he is still contesting.

Inflation and unemployment are in the double-digits, with the latter expected to rise as a result of slower economic growth. Moody’s expects the Turkish economy to contract by 2% in 2019.

Thomsen denied any talk of a potential IMF program with Turkey. “There is no discussion on a program between Turkey and the IMF, none,” he said, in response to a now frequent speculation of investors and analysts. “We have normal regular contact in the context of our surveillance.”

Financial market jitters are only building as a standoff with the U.S. over weapons system purchases builds. Efforts by the Turkish central bank cutting deep into its reserves to prop up the lira aren’t helping, with the currency this week listed as the worst performing among emerging markets.

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