(Adds details from report)
ISTANBUL, May 1 (Reuters) - In an unexpected move, Standard & Poor's cut its sovereign debt rating on Turkey further into junk territory on Tuesday, citing widening concern about the outlook for inflation amid a sell-off in the Turkish lira currency.
S&P said the ratings decision, cutting Turkey to "BB-/B" from "BB/B," was not part of its regularly scheduled reviews, reflecting what it said were growing concerns.
"The downgrade reflects our concerns over a deteriorating inflation outlook and the long-term depreciation and volatility of Turkey's exchange rate," S&P said in a statement.
"The rating action also reflects our concerns over Turkey's deteriorating external position and rising distress in the externally leveraged private sector."
The agency said it did not believe the central bank hiking its late-liquidity window rate last week would be sufficient to bring down inflation to the state-lender's 5 percent target or reduce the volatility in Turkey's real effective exchange rate.
The bank's reluctance to aggressively tighten policy in the face of double-digit inflation has increased concern that it is under pressure from Turkish President Tayyip Erdogan. S&P alluded to that in its statement, saying the central bank has been "facing increasing political pressure."
With the weakening of the lira against the dollar, the private sector will have a harder time repaying its foreign currency-denominated debt, S&P said, adding this would negatively impact government debt - 40 percent of which is denominated in foreign currency.
Numerous large Turkish companies have sought to restructure their debts. Reuters reported in April that Turkish food giant Yildiz Holding would restructure $6.5 billion of its $8.5 billion in debt.
Turkey's Dogus Holding, with outstanding loans that stood at 23.5 billion Turkish lira ($5.73 billion) at the end of 2017, is also in talks with banks on debt restructuring, according to sources familiar with the matter.
"Our downgrade reflects our view that there is a risk of a hard landing for Turkey's overheating, credit-fueled economy," S&P said.
$1 = 4.1015 Turkish lira Reporting by David Dolan; writing by Ali Kucukgocmen; editing by Peter Graff and Tom Brown