Sri Lanka's central bank raised key policy interest rates here Friday in view of rising inflation.

The repurchase and reverse repurchase rates have been raised by 50 basis points to 10.50 and 12.00 percent respectively, the bank said in a statement.

This is the fifth rate hike since June when inflation hit a 10 year high of 17.7 percent.

"Inflation has been on a rising trend since April 2006 reaching 19.3 percent in December 2006 and increasing further to 20.5 percent in January 2007," said the statement.

International lenders have urged the government to take steps to curb inflation by adopting higher policy interest rates.

The lenders have also warned that the island must show progress in its peace negotiations with the Tamil Tiger rebels in order to achieve the targeted 8 percent growth in the island's economy.

The Norwegian backed truce which marked its fifth anniversary on Thursday has been stalled in view of the escalation of conflict.

Nearly 4,000 people have died in the conflict during the last 15 months, the international truce monitoring group said on Thursday.

Source: Xinhua