SANTIAGO Jan 16 (Reuters) - Chile's central bank is largely expected to keep its key interest rate steady for a second consecutive month later on Thursday as it buys time to gather more information about the slowing economy of the globe's top copper producer.
Some in the market, however, see a risk the bank may opt to cut the rate following a recent pickup in inflation, continued weak economic output and cooling domestic demand, especially investment.
Eighty percent of the 60 analysts polled by the central bank earlier this month said they expected the rate to be held steady in January, while the remainder saw a cut of a quarter percentage point.
On December 12, the bank held the rate steady at 4.50 percent, taking a break after 25-basis-point reductions in October and November.
Since then data has shown that growth remained sluggish in November, while inflation picked up pace in December.
A 0.6 percent jump in December consumer prices brought inflation in the 12 months to December to 3.0 percent, the midpoint of the central bank's target range.
"The recent acceleration of headline and core inflation and the still unknown inflationary impact of recently introduced methodological changes to the CPI increase the authorities' option value of waiting for further evidence, particularly on inflation, before recalibrating monetary policy," Goldman Sachs economist Tiago Severo said in a note to clients.
With expectations high the rate will be cut two more times in 2014, analysts are keen to see if the bank will maintain its neutral bias regarding monetary policy.
The bank had previously said the rate is now at a neutral level after the cuts in October and November, and that it does not foresee any "significant" changes to monetary policy.
"We expect the central bank to keep the rate at 4.5 percent (on Thursday) and to again underscore a neutral bias for the coming months in order to address the current global situation, local inflationary trend, variation of our currency and maintain a proper anchor on price expectations," said Santiago-based brokerage BICE Inversiones in a report.
Chile's peso currency depreciated 9 percent versus the U.S. dollar last year, and has lost around 1 percent more in the first weeks of 2014, making the price of imports more expensive.
The bank will release its monetary policy meeting decision at 6 p.m. (2100 GMT) Thursday.