By Seltem Iyigun

ISTANBUL, Nov 27 (Reuters) - Turkish bond yields hit record lows on Tuesday after a central bank board member said inflation would fall to target next year, boosting hopes it will cut interest rates further.

The lira was trading a touch weaker and shares were just above flat.

Ahmet Faruk Aysan, who sits on the rate-setting monetary policy committee, said inflation at the end of this year was likely to be below the bank's latest forecast of 7.4 percent and that its 5 percent target in 2013 was 'definitely achievable'.

In an interview with Reuters in Helsinki, Aysan reiterated that the bank may consider a measured cut in its overnight borrowing rate and the one-week repo rate, its main policy rate, in the period ahead if the lira appreciates further.

The yield on the two-year benchmark bond earlier hit 6 percent, an all-time low, from Monday's close at 6.12 percent. By 1021 GMT, it was at 6.08 percent.

'The comments from the central bank about reaching the (inflation) target, and expectations that economic activity will not recover quickly pushed bond yields down,' said Burak Maldar, a vice-president at Halk Invest.

'It seems almost certain that the bank will cut its rates in December,' he said.

Maldar forecast the two-year yield could fall to 5.9 percent before the central bank's next policy meeting on Dec. 18 and could drop further afterwards, if there is another rate cut.

Fears that economic growth may not pick up as quickly as hoped were underlined on Monday by a dip in this month's capacity utilisation and manufacturing confidence figures, both leading indicators.

In a bid to support growth, the central bank cut its overnight lending rate, which sets the highest limit for banks' lira funding costs from the central bank, for the third consecutive time in October.

Istanbul's main share index was up 0.25 percent to 72,041 points, in line with a 0.31 percent rise in the global emerging markets index.

The lira was at 1.7951 to the dollar, slightly weaker than 1.7931 late on Monday. Against its euro-dollar basket it was flat at 2.0586.

(Writing by Seltem Iyigun; Editing by Nick Tattersall and Stephen Nisbet) Keywords: MARKETS TURKEY/

(seltem.iyigun@thomsonreuters.com)(+90 212 350 70 62)(Reuters Messaging: seltem.iyigun.thomsonreuters.com@reuters.net)

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