After Turkey's Lira Intervention, IMF Emphasizes Flexible Exchange Rate

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By Ian Talley

WASHINGTON--Hours after Turkey's central bank intervened in exchange-rate markets to halt the damaging fall in the value of the lira, the International Monetary Fund Thursday said authorities should stick to a flexible exchange rate and focus more on taming inflation.

"Turkey has had a flexible exchange rate system for a long time, and we believe it has served Turkey well," said IMF spokesman William Murray.

The IMF has been critical of the central bank's monetary policy in the recent past, warning that an increase in interest rates was an immediate priority to tame near-rampant inflation, and that the bank's monetary-policy framework is overly complex, has too many objectives, and is undermining its very mandate.

"What matters is that monetary policy avoids second-round effects to inflation by ensuring a strong nominal anchor," Mr. Murray said.

Economists, including those at the World Bank and the IMF, have warned that weaknesses in Turkey's economy and political turmoil in Ankara puts the country at particular risk for capital outflows and currency depreciation.

Turkey's central bank said it was intervening with direct foreign-exchange sales because of "unhealthy price developments."

Write to Ian Talley at ian.talley@wsj.com


  (END) Dow Jones Newswires
  01-23-141207ET
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