* Erdogan says central bank should cut interest rates
* Assets rallied after election gave Erdogan's party clear win
* 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 (Reuters) - 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 rates.
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 trade imbalances.
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 reputation.
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 economic outlook. (Additional reporting by Dasha Afanasieva and Behiye Selin Taner in Istanbul; Editing by Hugh Lawson)