Turkey's central bank hiked its key interest rate on Thursday, resuming its tightening cycle as one of the world's highest inflation rates rose again last month.

The bank's monetary policy committee decided to raise the policy rate from 45 percent to 50 percent, with a statement citing "the deterioration in the inflation outlook".

The central bank had declared that its hike in January would be its last as the level was sufficient to start easing the cost of living crisis.

But annual inflation rose again in February, reaching 67.1 percent.

The bank had kept its interest rate unchanged in February after having raised it from 8.5 percent to 45 percent since June.

The central bank said Thursday that its "monetary policy stance will be tightened in case a significant and persistent deterioration in inflation is foreseen".

Economists say pressure on Turkish policymakers is building ahead of local elections on March 31 as capital inflows have slowed and foreign exchange reserves are falling again.

Inflation is a thorn in the side of President Recep Tayyip Erdogan in the run up to the elections as his ruling AKP party is seeking to win back control of major cities especially Istanbul, currently held by the main opposition party.

In a public rally in western Turkey on Wednesday, Erdogan admitted that high inflation was a challenge for the government.

"Today we are tested by the high cost of living and as a result the loss of welfare of our people with fixed income," he said.

But he assured that as inflation went down, employees and pensioners would benefit from the positive outlook in economy.

"We will overcome all these," he said.