* NZ Q4 inflation +0.1 pct, annual rate +1.6 pct
* Higher airfares, household costs offset cheaper food, fuel
* Market prices greater chance of rate hike next week (recasts, updates market pricing, adds analyst quotes)
WELLINGTON, Jan 21 (Reuters) - New Zealand could start raising interest rates as soon as next week after an unexpected rise in consumer prices in the fourth quarter underlined bubbling inflation pressures in a rapidly growing economy.
Analysts say an interest rate hike at next Thursday's Reserve Bank of New Zealand (RBNZ) policy-setting meeting is a close call, keeping the South Pacific nation on track to become the first developed economy to tighten in the current cycle.
"Today's data leave the door to a January hike - which was opened at the December MPS - well and truly open," said RBC senior economist Michael Turner.
"On balance, we see risks remaining skewed towards March, by which stage more information on the impact of housing credit controls should become more apparent."
Official data on Tuesday showed the consumer price index rose 0.1 percent in the three months to Dec 31, confounding expectations for a 0.1 percent fall in a Reuters poll, and pushing the annual rate up to 1.6 percent - the highest since March 2012.
The central bank had forecast a fall of 0.2 percent.
The surprise inflation print sent the New Zealand dollar racing up about three-quarters of a cent to a high of $0.8340 from $0.8265, and interest rate futures <0#NBB:> falling.
Financial market pricing based on interest rate swaps implied a 46 percent chance of a rate rise next week from 24 percent before the data.
The RBNZ signalled last year it was likely to start raising rates by the middle of this year, as inflation pressures gather pace.
The data confirmed inflation is headed towards the mid-point of the central bank's 1.0 to 3.0 percent target band.
The economy is expected to grow at an annual rate of at least 3 percent over the next two years, boosted by strong commodity prices, which are underpinning terms of trade at 40 year highs, stronger building activity, a housing market at record levels, and solid domestic demand being boosted by migration gains.
The upsurge in building activity followed two devastating earthquakes in Christchurch in 2010-2011.
The central bank, which pioneered inflation targeting, has said the speed and extent of rate rises is dependent on the impact that higher house prices and construction costs have on broader inflation pressures.
The non-tradables component of the consumer price index, a barometer of domestic inflation, including electricity, house rents, and property prices, rose 0.5 percent on the previous quarter for an annual rise of 2.9 percent, the highest since September 2011.
The strength of the numbers was enough for one bank to bring forward its rates forecast, with the ANZ Bank changing to a January start from March.
"With the ... economy appearing to be on a firmer trajectory than the (Reserve) Bank has assumed, this will translate into upward pressures on core inflation," said senior economist Mark Smith.
"The corollary to moving earlier is that the Bank will have to do less tightening later on, that would mitigate the New Zealand dollar potential to overshoot."
But 13 of 17 economists were sticking with the first rate rise to occur in March.
During the quarter, lower fresh food, and petrol prices, were offset by rises in airfares, new house prices, property maintenance, and house rents.
Tradable prices, those which are open to competition, and can also reflect the level of the exchange rate, fell 0.5 percent, to be 0.3 percent lower on a year ago.
The government statistics agency said new house prices were highest in Auckland and the Canterbury region, where earthquake reconstruction is also driving up house rentals.
In a bid to cool the rise in house prices, and reduce the risks to the financial system from a sharp market downturn, the RBNZ imposed limits on the amount banks can lend for low-deposit property loans since last October.
To date the limits appear to have had little impact on prices, although the number of low deposit loans has fallen markedly, and the number of house sales is lower.
(Reporting by Gyles Beckford; Editing by Shri Navaratnam)