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SANTIAGO, April 10 (Reuters) - Chile's central bank held the target overnight lending rate at 6.25 percent for a third month in a row at its monthly monetary policy meeting on Thursday, in a decision widely expected by the local market.

Of 20 currency traders polled by Reuters this week, 17 predicted the bank would leave the rate unchanged in deference to the weak dollar and low U.S. rates, while three expected the bank would hike the rate to curb rising inflation.

"This was expected and what's important is that the statement had neutral tendencies," said Tomas Flores, an economist with the Instituto Libertad y Desarrollo think tank. "The change in language reaffirms the bank's outlook for moderating inflation in the second half of the year."

The bank said future rate changes would depend on inflation as well as the appreciation of the peso.

"Developments in the complex current international scenario and their implications for inflation, the persistent appreciation in the real exchange rate and the potential propagation of inflationary shocks, will be particularly important," the bank said in its communique.

Chile's consumer price index rose a milder-than-expected 0.8 percent in March, but the reading still pushed annual inflation to a 14-year high of 8.5 percent from 8.1 percent the prior month. Economic growth also picked up in February to 5.6 percent.

Chile's central bank has raised its benchmark rate five times since July in a bid to control surging inflation, while the U.S. Federal Reserve has slashed its key rate to 2.25 percent to stave off recession.

Higher food and energy prices pushed Chile's annual inflation to 7.8 percent in 2007 compared with 2.6 percent in 2006.