ISTANBUL, April 15 (Reuters) - An annual meeting of Turkey's central bank on Thursday will be closely watched for signs that Prime Minister Tayyip Erdogan's government, strongly opposed to high interest rates, is trying to boost its influence over monetary policy.
Economists say the normally innocuous general assembly, at which executives and technocrats are elected and reshuffled, has taken on greater significance this year after Erdogan called two weeks ago for an emergency interest rate cut to boost the economy.
Governor Erdem Basci, speaking three days later, hinted at the possibility of rate cuts for the first time in a year and the bank has effectively already started loosening by the back door, lowering borrowing costs by providing more liquidity through its regular repo auctions.
Erdogan has been a vocal critic of high rates, eager to defend his reputation for overseeing a decade of strong growth, particularly as Turks go to the polls in a presidential election in August in which he is widely expected to stand.
"The general assembly will be a milestone. Appointments made here will tell us the extent of the interference with the central bank," one banking sector analyst said, declining to give his name because of the sensitivity of the issue.
The central bank - which, along with the government, says its monetary policy committee alone decides on interest rates - declined to comment.
"It's obvious the prime minister is disturbed by the bank's interest rate policy," said another Istanbul-based economist.
"The appointment of members close to the government to the bank's assembly may make its decision making and operations more difficult," he said.
FEUD WITH CLERIC
The central bank stunned markets with a massive rate hike at the end of January, ignoring political pressure - Erdogan had spoken against such a move just hours earlier - as it battled to defend the lira after it slumped to record lows.
The move restored its credibility in the eyes of some investors, after months in which it had tried to support the lira by burning through forex reserves and tightening liquidity on the margins while avoiding outright rate hikes.
But questions over the extent of its independence remain.
Erdal Saglam, a columnist in the Hurriyet daily newspaper, wrote on Monday that Erdogan's feud with an influential U.S.-based cleric he blames for contriving a corruption scandal could draw in economic institutions including the central bank.
Erdogan accuses cleric Fethullah Gulen, a former ally whose network of followers has influence in institutions including the police and judiciary, of plotting against him. The government has responded by reassigning thousands of police officers and hundreds of judges and prosecutors.
Gulen's supporters say they number in the millions and members of his network are employed across Turkey's institutions, including in the central bank.
"It looks like after the judiciary and comprehensive changes in some ministries it has come to the key bodies in the economic administration such as the central bank, the banking watchdog (BDDK) and capital markets board (SPK)," Saglam wrote in an unsourced opinion piece.
He said there had even been rumours in Ankara that Basci himself might come under pressure to resign but said that bankers he had spoken with had dismissed such a possibility.
The central bank and government officials declined to comment on Saglam's article.
"Some heads will roll among the bureaucrats. But I don't expect anything extensive," one former central banker told Reuters. "Erdem Basci will not lose his seat."
(Reporting by Asli Kandemir, Ozge Ozbilgin, Birsen Altayli and Seda Sezer; Writing by Nick Tattersall)