UPDATE 3-Chile GDP growth quickens pace in Q2, rates seen held

* Q2 GDP expands 5.5 pct y/y, as expected
* Robust domestic demand boosts world No.1 copper producer
* Key rate seen held at 5 pct in short-term

SANTIAGO, Aug 20 (Reuters) - Chile's seasonally adjusted
economic growth picked up in the second quarter from the first
quarter to 1.7 percent buoyed by domestic demand, the central
bank said on Monday, but the bank is still seen keeping interest
rates steady in the short term.
The economy of the world No.1 copper producer expanded 5.5
percent in the second quarter, as expected, from a year earlier
, propelled by domestic demand, which rose 7.1
percent, the bank added.
Chile's small, export-dependent economy is bracing for
fallout from the euro zone's sluggish economic growth and a
cooling in top trade partner China, but many in the financial
markets have don't see the central bank cutting interest rates
soon due to solid local growth and easing inflation.
"This was within expectations and we don't see major
(monetary policy) changes for now," said Matias Madrid, chief
economist with Banco Penta in Santiago. "The central bank
remains in wait-and-see mode and we're projecting a hold for
what's left of the year."
The Andean country's central bank held its key interest rate
steady at 5.0 percent for a seventh straight month
last week.

"All the economic sectors grew, though services, retail and
construction can be highlighted," the bank said in its report.
"In terms of trade, exports showed a small increase, in contrast
with dynamic imports."
In addition to producing around a third of the world's
copper, Chile exports wine, wood, fruits and salmon. The South
American country is particularly at risk from softening global
demand for its key exports.
The economy in the first half of the year expanded 5.4
percent compared with the first half of 2011, the bank added.
Chile's posted a $2.442 billion current account deficit in the
second quarter.
The yawning current account deficit, which was $129 million
in the first quarter of the year, is due to brisk domestic
demand for imports and falling prices for top export copper
, analysts say.
The bank revised first quarter seasonally adjusted economic
growth to 1.3 percent from a previous estimate of 1.4 percent
compared with the last quarter of 2011. It also downwardly
revised first quarter year-on-year GDP growth to 5.3 percent
from a previous estimate of 5.6 percent.
Chile revised down its forecast for economic growth this
year to 4.7 percent from 5.0 percent, its budget director said
last month.
The Chilean interest rate futures market is pricing in that
the central bank will keep its benchmark interest rate steady
through November.