* Lira down 40 percent this year
* Government to announce medium-term programme on Thursday
* Rate hike alone not enough for markets, analyst says
* Lira has now surrendered gains from rate hike (Updates prices, adds analyst quote)
By Behiye Selin Taner and Ali Kucukgocmen
ISTANBUL, Sept 18 (Reuters) - Turkey's lira fell as much as 2 percent on Tuesday, erasing all its gains since the central bank's rate hike last week, as investors took a cautious tack before the government announces its three-year plan this week.
Finance Minister Berat Albayrak has promised "realistic macro targets" and "right action plans" in the government's new medium-term economic programme, due on Thursday. He has also promised savings measures and making the fight against inflation and the current account deficit priorities.
The lira has fallen 40 percent so far this year, battered by concerns about the credibility of the central bank, given influence from President Tayyip Erdogan.
The bank last week raised interest rates by 6.25 percentage points, in an effort to tame double-digit inflation and put a floor under the lira. But after initially strengthening, the currency has given up most of the gains from the hike.
"Last week's rate hike is a first step but, if you want to improve your credibility, it is a long-term process," said Guillaume Tresca, senior emerging market strategist at Credit Agricole.
On its own, higher rates are not enough to ensure a sustainable strengthening in the lira, he said, adding that the government needs to improve the fiscal and current account deficits and postpone large infrastructure projects.
The lira stood at 6.4034 to the dollar at 1330 GMT, weakening from a close of 6.3150 on Monday. The currency weakened as far as 6.4620 earlier in the day, less than it was just before last Thursday's rate hike.
Since gaining expanded executive powers in July, the president has tightened his grip on the economy and monetary policy, appointing his son-in-law, Albayrak, as finance minister and taking charge of the sovereign wealth fund.
One analyst, who declined to be named, said sentiment was also hit by Erdogan's comments in the newspaper Hurriyet on Monday that authorities should look into members of the main opposition Republican People's Party over its 28 percent stake in Isbank.
Those comments triggered declines in Isbank shares and the Istanbul exchange's banking index.
There was a wait-and-see mood in the market before the medium-term economic programme is released, the analyst said.
If the lira remains weak, "it will create the perception that the central bank rate hike was ineffective and this may lead to a further worsening," the analyst said. (Writing by Daren Butler; editing by David Dolan)