(Adds data on growth, analyst quote, background on economy)
SANTIAGO, July 7 (Reuters) - Chile's economic activity rose 2.3 percent in May from the same month a year ago, as an increase in mining activity helped mitigate a fall in the formerly red-hot retail sector, the central bank said on Monday.
The IMACEC economic activity index, encompassing about 90 percent of the economy tallied in gross domestic product figures, came in below forecasts for a 3.0 percent rise.
The fresh signs of weakness in the Chilean economy, especially waning consumption, bolstered bets the central bank will resume its rate-cutting cycle, though an uptick in inflation may keep its hands tied for a while.
"The data continues to confirm our vision of an increased slowdown in consumption in the second half of the year, which will eventually force the Chilean central bank to restart its rate-cutting cycle, with an eye to a monetary policy rate of 3 percent to 3.25 percent in the first half of 2015," said Ruben Catalan, economist with BCI Estudios.
The central bank cut its benchmark interest rate by 100 basis points to 4 percent between last October and March in a bid to boost the economy, which is slowing on the back of lower investment and consumption. It has since kept the rate on hold as inflation has surged above the bank's 2 percent to 4 percent tolerance range.
In comparison with April, economic activity increased a seasonally adjusted 0.6 percent.
The bank pointed out that May had one fewer working day than the same month a year ago. (Reporting by Santiago bureau; Writing by Alexandra Ulmer and Anthony Esposito; Editing by W Simon)