UPDATE 2-Turkish central bank leaves rates on hold as election looms

* Lull in political pressure on bank ahead of vote

* Bank says forex volatility limits core inflation improvement (Adds economist comment)

By Daren Butler

ISTANBUL, May 20 (Reuters) - Turkey's central bank left interest rates on hold on Wednesday, taking advantage of a lull in political pressure for rate cuts ahead of a June 7 election to keep up its fight against rising inflation.

President Tayyip Erdogan has issued a barrage of calls for lower rates in the past few months but has halted his criticism in recent weeks after it sparked widespread concern about political meddling in monetary policy.

All 19 economists in a Reuters poll had expected the bank to leave rates on hold.

"Recently elevated volatility in the exchange rates has limited the improvement in core inflation," the bank said in a statement.

"This, combined with the uncertainty in global markets and volatility in energy and food prices, makes it necessary to maintain the cautious stance in monetary policy."

The central bank left its one-week repo rate at 7.50 percent and overnight borrowing rate at 7.25 percent. The overnight lending rate stayed at 10.75 percent, and the primary dealers' overnight borrowing rate at 10.25 percent.

Garanti Securities chief economist Gizem Oztok Altinsac said there was nothing in the statement to influence markets and that the bank's policy outlook depended in part on the post-election environment.

"If we face an unclear environment which causes continued pressure on the lira it will require the central bank to show a tighter stance," Altinsac said.

"In an environment where growth is under such pressure, the central bank will resist an interest rate hike to the end."

Inflation rose more than expected in April, giving the central bank some room to dodge the pressure for rate cuts before June's parliamentary elections.

Last month, the bank hiked the amount it pays on lira reserves and cut the cost of borrowing dollars in an attempt to shore up the battered lira.

The currency hit a record low of 2.7435 against the dollar a month ago but made its biggest weekly gain in 3-1/2 years last week. It firmed to 2.5945 on Wednesday from 2.6040 before the decision.

The lira rebound last week was partly driven by expectations that while the ruling AK Party could form a government on its own after a June vote, it may not get enough seats to enable it to change the constitution.

Erdogan may revive pressure on the bank to cut rates after the election. He has said high rates cause inflation -- an argument that goes against mainstream economics -- and those who defend them are guilty of treason, a comment that has unnerved financial markets.

European Union finance ministers issued a veiled rebuke of Erdogan's demands for lower rates last week, saying that "conflicting" Turkish monetary policy was failing to lower inflation and that a tighter stance was needed. (Additional reporting by Nevzat Devranoglu; Editing by Hugh Lawson and Nick Tattersall)