UPDATE 2-Chile inflation pace quickens in March, rates seen held in April
(Adds impact or interest rate expectations, analyst's comments) By Antonio De la Jara and Anthony Esposito SANTIAGO, April 8 (Reuters) - Chile's consumer price index rose at its fastest pace in about 1-1/2 years in March, beating expectations, government data showed on Tuesday, likely prompting the central bank to pause its easing cycle and keep its key rate on hold next week. An increase in prices of education, food, non-alcoholic beverages, clothes and footwear lifted the CPI 0.8 percent in March, the government's INE statistics agency said. Faced with easing growth and cooling domestic demand, especially in investment, the bank has cut the key interest rate by 100 basis points to 4.0 percent since October in an attempt to stimulate the economy. But a stronger-than-expected 2.9 percent jump in economic growth in February versus a year earlier, and a recent uptick in inflation spurred by a weaker peso, may make rate easing more challenging in the short term, analysts say. "The recent batch of leading indicators of activity has been, on average, in line or slightly better than expected whereas today's CPI print came above already-high expectations," said Tiago Severo, economist at Goldman Sachs. "Against this backdrop, we believe the monetary policy committee is more likely to remain on hold in April, deferring further easing for a couple of months," he added. Inflation in the 12 months to March was 3.5 percent, in the upper half of the central bank's 2 percent to 4 percent targeted range. In its latest assessment of Chile's economy, the quarterly Monetary Policy Report published on March 31, the central bank said inflation will temporarily increase to the high-end of its tolerance range but would drop to about 3 percent by the end of 2014 The peso currency 's depreciation has made some imported goods like fuel more expensive in recent months, causing a bump in inflation. So far this year, the peso has weakened 4.7 percent versus the U.S. dollar, following a 9.01 percent slump in 2013. Core inflation, which doesn't include fruit, fresh vegetables or fuel, was 0.7 percent in the month, the INE said. (Writing by Anthony Esposito; Editing by Bernadette Baum)
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