* Lira fourth-worst performer vs USD this year
* Investors worried by inflation, policy response
* Erdogan spokesman says no discord in economy team (Updates lira-dollar rate in paragraph 8)
By Daren Butler
ISTANBUL, April 5 (Reuters) - The Turkish lira slid to a record low against the dollar on Thursday, hit by renewed concerns about the central bank’s ability to tackle inflation after a report that President Tayyip Erdogan had ramped up his criticism of monetary policy.
The lira has fallen nearly 6 percent against the dollar this year, making it the fourth-worst performer among 26 emerging market currencies, as investors have been unsettled by double-digit inflation, a policy response they see as inadequate and doubts about the future of economic policy chief Mehmet Simsek.
“There’s a problem of very high inflation and the central bank hasn’t met its inflation targets for six or seven years,” said William Jackson, an economist at Capital Economics in London.
“If the currency comes under pressure, there is a lingering concern that the central bank won’t be able to react because of government pressure.”
According to a report in the Hurriyet newspaper on Thursday, Erdogan criticised a recent interest rate hike at a closed-door meeting of his ruling AK Party this week.
“Before I went abroad, we had a meeting regarding interest rates. We referred to lowering (them). Then when I was abroad, the central bank raised interest rates,” he reportedly said.
“We take a decision and they don’t implement it. They did it behind my back,” the Hurriyet cited him as saying.
When asked about the report, Erdogan’s spokesman told a news conference that the president’s position on interest rates was well known. Erdogan, a self-described “enemy” of interest rates, has repeatedly called on the central bank to lower borrowing costs to boost the economy.
The Turkish currency briefly hit a record low of 4.0501 to the U.S. dollar before recovering slightly to trade at 4.0495 at 2007 GMT.
Separately, the Hurriyet also said there was speculation in Ankara that Deputy Prime Minister Mehmet Simsek had offered his resignation to Prime Minister Binali Yildirim, who had then forwarded the matter to Erdogan.
Simsek, who is in charge of the economic management team, said on Twitter he would work to serve the people until his “last breath”. He has worked at investment banks on Wall Street and in London and is seen as one of the most investor-friendly members of the government.
Erdogan’s spokesman, Ibrahim Kalin, said talk of Simsek’s resignation was just an allegation. Kalin said it was not true that there were disagreements among the economic management team.
Work was continuing on lowering inflation and Erdogan was following the issue closely, he said.
Turkey’s central bank last raised rates in December, hiking the highest of the four interest rates it uses to set policy by 50 basis points. Inflation has remained in double digits, even though it has cooled from the 14-year high of 12.98 percent hit in November.
On Wednesday, the Hurriyet said the government has been working on measures to lower interest rates by reducing Treasury’s borrowing requirement. It said the new model is expected to be announced by Erdogan in a fortnight.
“There have been (reports on) a package to lower interest rates and President Erdogan’s criticism of officials responsible for the economy,” said a banker who declined to be named.
“Today the central bank was dragged into this. Because we do not understand where this process is going, these developments remain a source of concern in the market and impact pricing,” the banker said.
Against the euro, the lira weakened to 4.9478, still off the record low of 4.9728 hit last month.
The yield on the benchmark 10-year bond rose to 13.10 percent from 12.69 percent on Wednesday. The main BIST 100 share index rose 0.71 percent to 114,781 points.
The central bank will hold its next rate-setting meeting on April 25. (Additional reporting by Nevzat Devranoglu in Ankara and Claire Milhench in London; Writing by Daren Butler and David Dolan; Editing by Dominic Evans)