UPDATE 1-Chile CPI rose 0.4 pct in March, fastest pace since Oct
SANTIAGO, April 8 (Reuters) - Chile's consumer price index posted a 0.4 percent rise in March, its fastest pace since October, driven higher by rising education, food and non-alcoholic beverage costs, government data showed on Monday.
March's CPI rate came in above expectations for a 0.3 percent increase, but the 12-month figure of 1.5 percent remained well below the central bank's tolerance range of 2 percent to 4 percent.
With students going back to classes in March after the southern hemisphere's summer, school and university prices typically rise.
"Variations in (education) prices are explained by annual adjustments in the value of 2013 tuition," the government's INE statistics agency said.
Gasoline and cigarette prices also rose, weighing on consumer prices, although lower electricity prices and inter-regional bus fares offset the increase, the INE added.
Chile's inflation was 0.1 percent in February and 0.2 percent in January, after remaining unchanged in December.
Core inflation was 0.2 percent in March.
Last week, Chile's central bank lowered its inflation outlook for 2013 to 2.8 percent from a previous 2.9 percent view due to "transitory factors," while hiking its growth forecast for the year.
Inflation is seen rising to converge at 3.0 percent in 2014, the bank added.
The central bank's benchmark interest rate has remained on hold since a surprise cut to 5.0 percent in January 2012, as the bank weighs global risks against a surging domestic economy.
But central bank board member Enrique Marshall said over the weekend that the bank will act if the local economy maintains dynamism "above what is reasonable," and interest rates are the best instrument at the entity's disposal.
Ebullient domestic demand, an economy nearing full employment and heavy investment have protected the world's No.1 copper producer from a sharp slowdown on the back of global woes, but many analysts are now worried about overheating.
The bank has underscored that the main local risk to Chile's economy is that growth in domestic demand continues to outpace the expansion of gross domestic product.
In the latest poll of traders released on March 27, the median forecast was for the central bank's benchmark rate to remain at 5.0 percent in three and six months' time and rise to 5.25 percent in 12 months' time.