UPDATE 2-Chile inflation below forecast in February, pick-up seen
* Reuters poll saw February CPI increasing 0.3 percent
* 12-month CPI through February drops to 1.3 percent
* Inflation to pick up, no overheating- Finance Minister
* Rates seen held at 5 percent in the short-term
By Antonio De la Jara and Moises Avila
SANTIAGO, March 8 (Reuters) - Chile's February consumer price index rose a lower-than-expected 0.1 percent, the government said on Friday, suggesting the Andean country's booming economy hasn't triggered significant price pressures.
With unemployment at a six-year low, growth exceeding forecasts and capital pouring in, some analysts have questioned whether the investor darling is at risk of overheating.
While the government says that inflation will pick up the pace in coming months, Finance Minister Felipe Larrain, later on Friday, stressed the world No.1 copper producer's economy isn't overheating.
"Fears of overheating are unfounded," Finance Minister Felipe Larrain told reporters as he toured a fruits and vegetables market in the capital Santiago.
"Inflation is under control," he added. "Undoubtedly we're going to see somewhat higher inflation figures in coming months, but we've kicked the year off very well."
Lower food and nonalcohlic beverage prices offset higher transport costs in February's CPI, which came in under a 0.3 percent jump forecast in a Reuters poll. The index had posted a 0.2 percent rise in January, after remaining unchanged in December. CPI rose 0.4 percent in February of last year
Domestic risks to Chile's booming economy have become more important in the short term, although they have not translated into higher inflationary pressures, central bank head Rodrigo Vergara said on Wednesday.
The bank has held the benchmark interest rate at 5 percent since a surprise cut in January 2012, as it weighs the competing pressures from slowing global demand against domestic dynamism.
"I don't think this (inflation reading) will change the (bank's) outlook on rates. They're in a bit of a sweet spot between strong growth and slowing inflation and I suspect they're going to stick at 5.0 percent for a few more months at least," said Michael Henderson, Latin America Economist with Capital Economics in London.
Traders polled by the bank see the rate inching up to 5.25 percent in 12 months due to moderate inflation and brisk growth.
CHILE INFLATION EASES IN FEB
Chile's lower-than-forecast inflation reading contrasts with Brazil's February CPI, which was also released on Friday.
Consumer prices in Latin America's largest economy's rose 0.60 percent last month, outstripping all 39 forecasts in a Reuters poll.
Chile's core inflation was also up 0.1 percent in February.
Inflation in the 12 months through February in Chile was 1.3 percent, below the bottom end of the central bank's 2 percent to 4 percent tolerance range. It is the lowest 12-month figure since at least January 2011, according to the INE statistics agency's data.
Chile, which also exports wine, salmon, fruits and wood products, generated economic growth of 5.6 percent last year, defying forecasts. The central bank expects the economy to expand by 4.25 percent to 5.25 percent this year.