ISTANBUL, July 13 (Reuters) - Ratings agency Fitch on Friday downgraded its already “junk” rating on Turkey’s sovereign debt, citing a widening current account deficit, a jump in inflation and the impact of the plunging lira.

Fitch lowered Turkey’s Issuer Default Rating (IDR) to ‘BB’ from ‘BB+’ and attached an outlook negative.

“Economic policy credibility has deteriorated in recent months and initial policy actions following elections in June have heightened uncertainty,” Fitch said in a statement.

“This environment will make it challenging to engineer a soft landing for the economy.”

President Tayyip Erdogan, a self-declared enemy of high interest rates, appointed his son-in-law Berat Albayrak to the post of treasury and finance minister, exacerbating concerns the president will look to exercise greater influence over monetary policy.

Turkish lira which has lost more than a fifth of its value against dollar this year, weakened to a record low of 4.9767 on Wednesday during Asian trade.

A sustained reduction of inflation, which has hit a 14-year-high in June, would require an increase in the credibility and independence of monetary policy, Fitch said, and tolerance of a period of weaker economic growth despite Erdogan’s wishes.

The central bank’s monetary policy committee, which has raised key policy rates by 500 basis points since April in an effort to put a floor under the currency, next meets on July 24.

Fitch previously lowered its rating on Turkey to BB+ from BBB- in early 2017, its lowest investment-grade rating, expressing concern about political insecurity after a failed coup in 2016.

While noting that due to lower oil prices and ongoing tourism recovery will help Turkey’s current account deficit to GDP ratio to fall, Fitch forecasted net external debt to rise to 35 percent of GDP at the end of this year.

Following the first cabinet meeting, newly appointed Finance Minister Albayrak said, Turkey will prioritise the rebalancing of its economy and the fight with inflation, adding that fiscal policy will support those goals.

Fitch predicted average economic growth of 4.5 percent in 2018 following contractions in economy throughout the rest of the year -- a level substantially down from the 7.4 percent recorded last year. (Reporting by Yadarisa Shabong Writing by Ezgi Erkoyun Editing by Alistair Bell)