Turkey seeks to calm U.S investor nerves as lira plunges

Turkey's prime minister and his economic team sought on Wednesday to calm the nerves of top investors in New York who hold more than 20 percent of the main Istanbul stock index, after President Tayyip Erdogan's tirades against the central bank helped send the lira to record lows.Erdogan has repeatedly attacked the bank over its failure to cut interest rates as sharply as he wants ahead of a June general election, telling its governor and Deputy Prime Minister Ali Babacan, who is in charge of the economy, to "shape up".His comments have fueled uncertainty about the future of both Babacan, an anchor of investor confidence, andbank Governor Erdem Basci. Ministers have tried to reassure markets that neither is about to quit.The lira dropped to an all-time low of 2.5705 against the dollar as Economy Minister Nihat Zeybekci, an Erdogan loyalist not among the New York delegation, renewed calls for sharper rate cuts.The central bank has price stability as its core mandate, and it fears, along with most economists, that sharp interest rate cuts would stoke inflation, already running well above the bank's 5 percent target.Babacan, Prime Minister Ahmet Davutoglu and Finance Minister Mehmet Simsek attended a luncheon organized by Goldman Sachs.Davutoglu spoke for nearly half an hour to about 50 investors and bankers, rehashing past achievements and reforms, said one source who attended the luncheon but spoke on condition of anonymity."They were trying to explain their position and how they are coping with Europe's downturn and the complex neighborhood they are located in for their problems. These guys are essentially fighting the business cycle," saidthe source, a top veteran emerging market investor."He was asked about the bashing of the central bank governor, and deflected the question, saying other countries, including places like Germany, criticize the central bank," the source said.Other meetings scheduled are with Citi and Bank of America Merrill Lynch, on Wednesday and Thursday, officials in the prime minister's office said."It seemed a non-deal road show of sorts, like they were trying to dissipate the impact of Erdogan," said a second source.The investors they will meet hold an estimated 22percent of Turkey's top-100 share index, according to Isik Okte, investment strategist at Istanbul-based TEB Invest."The impact on the economy of President Erdogan's statements is triggering concern," one senior Turkish economy official told Reuters ahead of the meetings.Sentiment toward the lira was not helped by data on Tuesday showing annual inflation rising to 7.44 percent, sharply above the bank's 5 percent target, limiting its room to cut rates as sharply as Erdogan wants.Commenting on the data, the bank said core inflation indicators had continued to improve. Economists expect it to trim its policy rate by a further 25 basis points at its next meeting on March 17, if the lira does not tumble sharply.