* Twenty of 21 economists see rates on hold next Tuesday
* Babacan defends cenbank against political interference
* Survey shows inflation expectations worsening (Recasts with rate poll, inflation expectations)
By Nevzat Devranoglu and Birsen Altayli
ISTANBUL/BURSA, March 13 (Reuters) - Turkey’s central bank is expected to resist political pressure for a rate cut next week as its embattled governor seeks to calm nervous markets without further incurring the wrath of President Tayyip Erdogan.
Erdogan’s insistent demands for sharp interest rate cuts to fuel growth ahead of a June election - and his assertion that defending high rates amounts to treason - have unnerved markets, helping send the lira to a series of record lows.
Restrained from the rate hike he might otherwise support in the face of a tumbling currency and stubborn inflation, Governor Erdem Basci has resorted to steps on the margins to manage dollar liquidity. This so far appears to have had limited effect.
The lira briefly touched a record low of 2.6488 in afternoon trade on Friday, according to Reuters data. It has slid around 12 percent against the dollar this year, underperforming other major emerging market currencies such as the South African rand and the Indian rupee.
Twenty out of 21 economists in a Reuters poll expect the bank to leave its one-week repo rate at 7.5 percent at its next monetary policy meeting on Tuesday, with only one forecasting a 25 basis-point cut.
Deputy Prime Minister Ali Babacan, a staunch defender of the central bank’s independence, sought at an economic summit in the western city of Bursa to quell concerns about government interference in monetary policy.
“Proper communication by the central bank is important, and that communication should come only from the bank itself,” he said. “We need to work on the predictability of monetary policy and overcome uncertainties.”
A former Fulbright scholar and financial services consultant, Babacan has long been seen as an anchor of investor confidence. But that influence over financial markets has been blunted by speculation he may not return as a member of Erdogan’s economic team after the June parliamentary election.
In a follow-up interview on CNBC, Babacan said monetary policy should not be eased despite falling energy prices.
The weakening lira has started to hit the pockets of ordinary Turks, something the ruling AK Party is keen to avoid ahead of the parliamentary elections in three months.
Inflation expectations are also worsening.
Year-end inflation is seen at 6.98 percent, according to the central bank’s latest monthly survey of business leaders’ and economists’ expectations released on Friday, up from a forecast of 6.77 percent a month ago. (Additional reporting by Ece Toksabay in Istanbul; Writing by David Dolan and Nick Tattersall; Editing by Ralph Boulton)