UPDATE 2-Room for interest rates to rise in Argentina -IMF

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By Adriana Garcia

WASHINGTON, Oct 17 (Reuters) - Inflationary pressures are building in Argentina and there is room for further interest rate increases, a senior IMF official said on Wednesday.

"Interest rates remain negative in real terms. We think there is room for further monetary tightening," Charles Collyns, deputy director of the IMF's research department told a news conference.

Collyns said it is difficult to make projections on inflation in the South American country, since it is not "completely a free market".

"We certainly see a build-up in inflationary pressures in Argentina", he said.

He said it is difficult to predict how inflation would evolve, but the fund sees strong upward pressure from wages, which rose 23 percent in the last year, while the government keeps a number of prices controlled.

Argentina has been facing criticism after adopting unorthodox methods to control prices, including accusations from financial experts and economists that the government has been manipulating inflation data.

The Argentine economy has grown by more than 8 percent each year over the last five years, helped by a boom in consumer spending and agricultural exports following the country's 2001-02 economic crisis.

The fund predicts growth of about 7.5 percent this year, against 8.5 percent in 2006, and slowdown to 5.5 percent in 2008.

Average inflation will slow to 9.5 percent this year from 10.9 percent in 2006, and should increase to 12.6 percent in 2008, according to the IMF.

The Argentinian government official data for inflation was 9.8 percent in 2006. For 2007, on a December to December basis, the fund predicts inflation of 10 percent for Argentina, and 13.0 percent for 2008.