Turkey slashes interest rate again

Central bank cuts main interest rate by 3.25% after bigger cut in July, says inflation outlook continues to improve.

ANKARA - Turkey's central bank on Thursday slashed its main interest rate by 3.25 percentage points, the second cut in three months after President Recep Tayyip Erdogan said he was "allergic" to high rates.

The bank said the one-week repo rate was slashed to 16.50 percent from 19.75 percent, after a bigger cut in July of 4.25 percentage points.

The Bloomberg consensus had predicted a cut of 2.75 percentage points.

The Turkish lira was at 5.68 to the US dollar, a rise of over 1.1 percent in value towards 1130 GMT after the bank's announcement.

Erdogan said he was "allergic to... high interest rates" last week, as he stuck to his unorthodox position that high rates cause high inflation.

In July, he sacked central bank governor Murat Cetinkaya, allegedly after he clashed with the government over reducing rates.

The markets shrugged off the last rate cut and inflation in August dropped from 16.65 to 15.01 percent, a 15-month low, according to official figures published last week.

In the statement accompanying its decision, the bank said the "inflation outlook continued to improve" and that the "moderate recovery in economic activity" continued.

The MPC is due to meet again on October 24.