* Turkish lira hits record low
* (Updates market action, adds comment)
By Saqib Iqbal Ahmed
NEW YORK, May 23 (Reuters) - The dollar held near a more than five-month high against a basket of currencies on Wednesday, after minutes of the Federal Reserve's May policy meeting showed most policymakers thought it likely another interest rate increase would be warranted "soon" if the U.S. economic outlook remains intact.
"I didn't really see anything in the minutes that changed anything for the dollar. It still seems like there is a chance of a fourth hike in 2018," said Sireen Harajli, FX strategist at Mizuho Bank in New York.
The Fed has lifted borrowing costs once so far this year, in March, and policymakers are currently about evenly split between those who expect two more rate rises this year and those who anticipate three.
While inflation is now effectively at the Fed's 2 percent target after years of undershooting that level, policymakers noted that it was premature to conclude that inflation would remain at levels around two percent.
A number of Fed policymakers, including Chairman Jerome Powell, have been keen to stress they will tolerate inflation rising above the Fed's goal for a time without undue concern.
"You really have to say it is a dovish view to allow inflation to go a little bit above the target for some period of time," said Mike Baele, managing director, U.S. Bank Private Client Wealth Management, in Portland, Oregon.
The dollar index, which measures the greenback against a basket of six other currencies, hit a high of 94.188 before the release of the minutes, but pared some gains to trade up 0.42 percent at 94.006.
The greenback rose against the euro after data indicating a slowdown in European business activity hurt the common currency.
The euro was down 0.69 percent against the greenback at $1.1697, its weakest since mid November.
Worries about an incoming coalition Italian government comprised of the two anti-establishment parties and concerns about Turkey heading for an economic crisis kept the euro on the defensive.
The lira plunged to a record low against the dollar before reversing course to trade more than 2 percent higher after the Turkish central bank raised interest rates by 300 basis points in an emergency move.
Against the Japanese yen, the dollar slipped 0.72 percent, on pace for its worst day since late March, a day after U.S. President Donald Trump tempered optimism over progress made in trade talks with China.
The yen tends to rise in times of market turbulence since Japan is the world's largest creditor nation and traders tend to assume Japanese investors would repatriate funds at times of crisis.
Meanwhile, sterling fell to a 2018 low after weaker-than-expected UK inflation cast doubt on whether the Bank of England will raise interest rates this year.
Additional reporting by Chuck Mikolajczak; Editing by Dan Grebler and Chizu Nomiyama