Turkey should tighten its monetary policy and give its central bank more independence, an International Monetary Fund (IMF) mission said.

"To address (Turkey's) challenges, the mission recommended early policy rate hikes accompanied by moves to strengthen the central bank's independence," said the IMF in a press release. "Such moves would help reduce inflation more durably and allow reserve buffers to be rebuilt over time."

Foreign exchange reserves have fallen sharply in recent years because of market interventions and after the December currency crisis. The central bank has cut its discount rate by a total of 350 basis points to 10.5 percent in the past three months, while another cut is expected this month.

Year-over-year inflation rose to a record 85.5% in October, while the lira, which fell 44% against the dollar last year, has lost another 29% this year.

The IMF staff statement came after a mission visit to Istanbul and Ankara last month. A report on the visit is scheduled to be sent to the IMF executive board in January, after which formal recommendations will be made.