ISTANBUL, Oct 21 (Reuters) - Turkey's central bank slashed its policy rate by 200 basis points to 16% on Thursday, twice as much as expected and sending the lira to a new all-time low, delivering further stimulus sought by President Tayyip Erdogan despite rising inflation.
In a statement the bank suggested there would be little more room to ease policy through year end.
A Reuters poll had shown the central bank was forecast to lower its repo rate by 50 or 100 basis points. The bank also surprised markets last month with a 100-point cut that sent the currency tumbling.
President Tayyip Erdogan has long called for monetary stimulus and has sacked the last three central bank governors in less than 2-1/2 years, eroding the bank's credibility and sending foreign investors fleeing.
Erdogan fired three more monetary policy committee (MPC) members just last week, including two seen to oppose rate cuts, setting the stage for more easing.
The lira weakened as much as 3% to a record 9.501 versus the dollar before paring some losses. It has shed more than 20% this year, with most of the drop since the beginning of September when the bank began giving dovish signals
For import-heavy Turkey, depreciation leads to higher inflation via imports.
Annual headline inflation rose to 19.58% last month amid soaring living costs for Turks, including costly food and housing. Inflation has been in double digits for most of the past five years and well above a 5% target.
The bank has said inflation is temporary and focused on a core "C" measure, which is lower than headline but also rose to 17% last month.
Analysts have called the policy easing premature given it left Turkey's real yields sharply negative, and it runs against the grain of a world in which central banks are raising rates to head off global price rises.
(Reporting by Ezgi Erkoyun and Daren Butler; Editing by Jonathan Spicer)