ANKARA - Turkey's central bank has raised its key interest rate by 25 basis points to 17.5 percent, the third hike since last month as it battles with rising inflation.
The decision was made Thursday evening at a regular meeting of the bank's monetary policy committee.
In June, the central bank raised its key overnight borrowing rate twice -- first from 13.25 to 15.0 percent and then to 17.25 percent.
Inflation has been on the rise since April, pushed up by increasing oil prices and a depreciation of the Turkish lira. The currency has been hit by global capital flight from emerging markets and political tensions at home.
"The rise in inflation will continue in July, given the belated impacts of foreign exchange rates," the bank said in a statement on its web site.
Both the government and the bank have conceded that inflation will overshoot a 5.0-percent target this year.
The statement said the central bank has now focused on keeping the 2007 inflation target of 4.0 percent within reach.
"We expect that the falling trend in inflation will become evident from the second quarter of 2007," it said.
Battling inflation is a key element in a three-year 10-billion-dollar standy-by deal between Turkey and the International Monetary Fund (IMF).
Tight economic policies, backed by the IMF, have helped the government beat its inflation targets over the past three years, bringing the rate to 7.7 percent in 2005 from 29.7 in 2002.
07/21/2006 07:18 GMT