IMF’s Lagarde, BIS’ Carstens urge Turkey to leave Central Bank alone

Two global finance chiefs - International Monatary Fund Managing Director Christine Lagard and head of the Bank for International Settlements, Agustin Carstens - have told Turkish President Recep Tayyip Erdogan to preserve the independence of his country’s central bank after confusion sent the country’s currency on a downward spiral, Bloomberg reported.

The statements from the finance heads arrives after the Turkish lira took a dramatic fall against the dollar on Wednesday amidst worries about persistent inflation and political interference by the Turkish president in central bank decision-making. Erdoğan has persistently resisted the central bank’s push to increase interest rates as he maintains that high interest rates means high inflation.

"In terms of monetary policy, it’s always better for all political leaders to let the central bank governors do the job that they have to do, and to preserve and secure their independence," Bloomberg quoted Lagard as saying.

Meanwhile, Carstens said that the Turkish president had been "very outspoken" and advised governments against "tinkering with central bank independence."

The Turkish president said this month he would exert greater power over central banking if he won re-election in Turkey’s presidential elections set to take place on June 24.

"Some of the comments made alerted the international community and particularly the investors to the fact that suddenly the central bank of Turkey could be under directions, instructions, or influence,” Bloomberg quoted Lagarde as saying.

On Wednesday Erdoğan, following talks with deputy prime minister Mehmet Şimşek and central bank governor Murat Çetinkaya, agreed to raise interest rates which has appeared to slow the onoing free fall of the Turkish lira.