* Consumer prices rise in line with expectations
* Central bank injects 2.5 billion lira in one-week repo auction
* Istanbul share index up 0.95 percent
ISTANBUL, Aug 2 (Reuters) - The Turkish lira was steady against the dollar on Monday after inflation data that boosted the case for a further tightening of monetary policy.
The lira was at 1.9300 to the dollar at 1040 GMT having hovered around the 1.9258 mark earlier in the morning, before the July data was announced.
Consumer prices rose 0.31 percent month-on-month last month, in line with a Reuters poll forecast of 0.30 percent, for a year-on-year acceleration of the inflation rate to 8.88 percent, the Turkish Statistics Institute said.
The central bank raised its inflation forecasts for this year and next last week, saying the volatility of Turkey’s lira currency posed a threat to prices, and signalled further interest rate rises.
“Judging from the central bank (CBT) governor’s latest statements, the CBT sounded as if it is confident with the current tightening,” Muammer Komurcuoglu, analyst at ING, wrote in a research note.
The central bank increased its overnight lending rate by 75 basis points to 7.25 percent last month after the lira fell to record lows against the dollar.
“Given the CBT’s priority on maintaining currency stability and capping inflation expectations a stronger lira will be welcomed in the near term,” Komurcuoglu wrote.
The central bank injected 2.5 billion lira ($1.3 billion) into the market on Monday in a one-week repo auction after the inflation data, with a fixed simple rate of 4.5 percent
The yield on Turkey’s 10-year bond fell 5 basis points from 8.91 percent late on Friday.
The main Istanbul share index was up 0.95 percent at 74,033 points, outperforming the wider emerging markets index which rose 0.36 percent. (Reporting by Dasha Afanasieva; Editing by Nick Tattersall, John Stonestreet)