* Erdogan says central bank should cut interest rates
* Assets rallied after election gave Erdogan's party clear
* Investors fear govt interference in central bank policy
* Central bank said rates appropriate to tackle inflation
(Updates prices, adds quotes, detail)
By Alexandra Hudson and Seda Sezer
ISTANBUL, April 4 Turkey's lira rose on Friday
as U.S. jobs data boosted demand for emerging market assets,
helping the lira regain ground lost earlier when Prime Minister
Tayyip Erdogan called for the central bank to cut interest
By 1250 GMT the lira traded at 2.1080 to the
dollar, close to its strongest level this year and rebounding
from 2.1433 after Erdogan's remarks a day after the central bank
governor said fighting inflation was a priority and current
interest rates would help achieve that.
Investors have long been concerned about Turkey's government
pressuring the central bank to keep rates artificially low as it
moves into an election cycle. They have warned that this would
be detrimental for Turkey's struggle to reduce inflation and its
U.S. non-farm payrolls data for March came in slightly
weaker than forecast, leading some to suggest that the Federal
Reserve would keep interest rates nailed to the floor for a
while to come.
"Looks like the NFP data boosted emerging market sentiment.
These figures imply that the recovery in the labour market is
not as strong as expected, curbing the anticipation of an
earlier-than-expected rate hike by the Fed," said Gokce Celik,
analyst at Finansbank.
Turkey's benchmark share index, which had been flat
in the morning, was up 1.2 percent by 1335 GMT at 72,415 points,
outperforming MSCI's index of emerging markets
Speaking five days after nationwide local polls in Turkey
gave his party a clear victory after months of political
turmoil, Erdogan told reporters:
"As soon as the local election results were announced,
markets started to react positively. The stock exchange climbed
above 70,000. Yields are falling."
"In line with this, the central bank will probably convene
an extraordinary Monetary Policy Committee meeting, and this
time it should lower interest rates."
The bank implemented massive rate hikes at an emergency
meeting in January to stabilise the lira after it plunged to
record lows. Many analysts said the move was overdue and had
been delayed by government pressure, denting the bank's
Analyst Tim Ash at Standard Bank said of Erdogan's remarks,
"suffice to say very negative and disruptive comments -
politicians should steer clear of making such specific comments
over monetary policy in countries which are supposed to operate
with independent central banks".
Later on Friday Turkey's Deputy Prime Minister Ali Babacan
said: "I don't want to say too much about the central bank
because it's not right. It's very natural that the bank takes
note of what we say. But when we talk too much it is perceived
as if we have an influence on the bank."
The central bank said on Thursday its tight monetary policy
was sufficient to tackle inflation, even though consumer prices
rose more than expected in March, and inflation would start to
ease from June to approach its 5 percent target by mid-2015.
The yield on the two-year benchmark bond
eased to 10.64 percent from a previous close of 10.65 percent,
while the yield on the benchmark 10-year bond
rose to 10.39 percent from a previous close of 10.36 percent.
Earlier on Friday ratings agency Fitch cut its growth
forecasts for Turkey, citing slower domestic lending growth and
signs that consumer and investor confidence are moderating.
It now sees the economy expanding by 2.5 percent in 2014,
compared with a previous estimate of 3.2 percent.
Turkey targets medium-term economic growth of 5 percent,
which the central bank has said it expects to achieve by
mid-2015 after shortfalls in 2012 and 2013.
Fitch said it expected political noise to remain an enduring
feature ahead of presidential elections in August and
parliamentary elections in June 2015, periodically clouding the
(Additional reporting by Dasha Afanasieva and Behiye Selin
Taner in Istanbul; Editing by Hugh Lawson)