ISTANBUL (Reuters) -Turkey’s lira hit a record low on Friday as concerns over global inflation, an early election and a possible ratings downgrade marked the latest milestone in a years-long depreciation that has dogged the big emerging market economy. The currency - by far the worst performer among emerging markets this year - weakened as far as 8.6125 versus the dollar, outstripping its November intraday low of 8.58. Peers have faired better weathering a recent tide of rising U.S. bond yields that has prompted some investors to abandon Turkey, seen as more vulnerable to shocks due to policy mis-steps and diminished central bank credibility. The currency was at 8.5775 against the U.S. currency at 14:15 GMT, ahead of a review by S&P Global that could downgrade its Turkey credit rating. It also logged a new low against the euro on Friday. Despite Turkish inflation having risen above 17% in April, the central bank says price pressures have begun to fall and it is expected to lower the policy interest rate from 19% in coming months. But as the world emerges from the coronavirus pandemic, global inflation has risen, lifting yields and raising the prospect of policy tightening by the U.S. Federal Reserve. That in turn pulls funds from more vulnerable markets such as Turkey, hitting the lira and putting more upward pressure on domestic prices due to its heavy imports. “Earlier than expected (monetary) tightening in advanced economies is the most serious risk for Turkey because the inflationary pressures are mounting across the globe,” said Hakan Kara, former chief economist at the central bank who is now at Bilkent University. “If there was an early tapering (of Fed asset purchases) that would not be good news for emerging economies, especially those facing external fragilities,” he said on a World Bank panel on Thursday. The lira has tumbled 16% since mid-March when President Tayyip Erdogan abruptly fired a hawkish and market-friendly central bank chief and replaced him with Sahap Kavcioglu, who had criticised recent rate hikes. Bankers say a four-day currency slide this week in part reflects calls for early elections from opposition parties in the face of uncorroborated allegations against government officials from a mafia boss. The series of accusations this month by Sedat Peker, whose YouTube videos have been watched by millions, have forced Erdogan to defend his interior minister and insist that elections will not happen until 2023 as scheduled. Adding to political uncertainty, state media reported prosecutors seek a four-year prison sentence for the mayor of Istanbul, who is seen as a possible presidential challenger to Erdogan. MONETARY CREDIBILITY The lira has shed more than half its value in the last three years as Erdogan has ousted three central bank governors and his government has used unorthodox polices that analysts say have left the economy more vulnerable to crises. Foreign currency reserves plunged in the last two years as state banks sold about $128 billion in dollars to stabilise the lira, leaving Turkey potentially vulnerable if companies and banks have trouble meeting high foreign debt obligations. Even as the economy is expected to return to form with more than 5% growth this year, the tourism sector risks another lost season and paltry revenues, which inflates an already large current account deficit. In a statement on Friday, Kavcioglu said the current account should continue to improve and the central bank would act decisively to lower inflation. Later on Friday, S&P is set to review Turkey’s B+ rating. Credit debt swap markets, sometimes a leading indicator of moves, currently price Turkey two notches below S&P’s current rating in line with B- rated countries. Naci Agbal, who preceded Kavcioglu at the central bank, served less than five months as governor and was appointed a day after the lira logged its last record low in November. Agbal’s aggressive rate hikes temporarily attracted foreign investors and lifted the currency. But Tatha Ghose, analyst at Commerzbank, said Erdogan’s public opposition to high rates and his rapid leadership shuffles have hurt the central bank’s credibility and led to a “familiar lira spiral”. Reporting by Jonathan Spicer; Additional reporting by Marc Jones in London; Editing by Daren Butler, Hugh Lawson and Andrew Heavens Our Standards: The Thomson Reuters Trust Principles.