UPDATE 2-Chile consumer prices inch upward, boost rate cut bets
* Market sees 25 bps rate cut in February amid economic slowdown * Chile posts first trade deficit since August 2013 * Extended port strike hurts exports in January * Copper export revenue falls to lowest in 4-1/2 years By Anthony Esposito and Felipe Iturrieta SANTIAGO, Feb 7 (Reuters) - Chile's consumer price index rose slightly in January, in line with forecasts and cementing expectations that the central bank will cut its key interest rate later this month as an economic slowdown grips the world's top copper producer. The CPI rose 0.2 percent in January, matching a Reuters forecast, as prices for transport, health services and housing increased, the government said on Friday. Inflation in the 12 months to January totaled 2.8 percent, just below the midpoint of the central bank's 2 percent to 4 percent target range. Core inflation, which excludes volatile food and energy prices, was 0.2 percent in January. Increased prices for fuels and new cars also spurred inflation, as Chile's peso currency depreciated versus the U.S. dollar, making some imports more expensive. "The impact of the peso's depreciation was seen in January's CPI," said Matias Madrid, chief economist at Banco Penta. "Just considering gasoline and new cars, both of which are imported, 65 percent of the month's variation (in inflation) is explained." The local peso shed 5.33 percent against the dollar in January, deepening its 9.0 percent depreciation in full-year 2013 and sliding to its weakest level since October 2009. A central bank poll released on Jan. 22 showed that traders expected the benchmark interest rate to be cut by 25 basis points on Feb. 18 to 4.25 percent. The bank held its key rate steady last month, but suggested it could increase monetary stimulus in a bid to lift slowing economic growth and steer inflation toward its target of 3 percent. As a result, Friday's CPI data was closely watched by the market. "With this CPI data, we reiterate our expectation for the central bank to cut the (benchmark) rate at its next meeting ... and eventually cut it again to bring the rate to 4.0 percent by the end of the year," Banchile Inversiones said. A recent string of disappointing economic readings has further bolstered bets that cuts are looming. The central bank reported on Friday that export-dependent Chile posted a trade deficit of $268 million in January, its first monthly gap since August 2013. Exports last month slumped to a 3-1/2-year low of $5.65 billion, falling in large part to an extended January port strike that prevented millions of dollars in natural resource and agricultural goods from being shipped abroad. "Importantly, the trade figures were distorted by port strikes during the period ... weakening trade balances have been one of the main drivers of the deterioration of the country's current account balance over the last few years," said Tiago Severo at Goldman Sachs. The January exports figure marks an 11 percent drop from December and was down nearly 19 percent from January 2013's levels. Revenue from copper, the country's top export, fell to $2.30 billion in January, a 34 percent drop from December's $3.49 billion and the lowest figure in nearly 4-1/2 years. The world price for copper lost 4 percent in January, its weakest month since last June. Data on Wednesday showed that Chile's economic activity grew at its slowest annual pace in 2-1/2 years in December, adding to the view that the central bank will cut the key rate.