SANTIAGO, Nov 8 (Reuters) - Chile's inflation rate slowed sharply in October, falling to 0.1 percent, the government said on Friday, bolstering market bets that an interest rate cut is on the horizon to spur economic growth. The soft inflation reading, as measured by the consumer price index, followed a 0.5 percent advance in September. Higher prices for food and non-alcoholic beverages were partly offset by lower prices for transport. The September result matched a Reuters forecast, and was the lowest monthly reading since May. "We have inflation that is perfectly under control, on the lower end of the central bank's range," Finance Undersecretary Julio Dittborn said during a presentation at an event organized by Reuters. Inflation in the 12 months to October was 1.5 percent, well below the central bank's 2 to 4 percent target range, the INE national statistics agency said. The reading in the 12 months to September was 2.0 percent. The inflation reading, combined with Chile's easing economic growth and cooling domestic demand, supports forecasts for another interest rate reduction, following the bank's surprise decision to cut the key rate by 25 basis points to 4.75 percent on Oct. 17. Considering "disappointing leading indicators of activity, a better-than-expected trade balance, and misaligned inflation dynamics, a source of growing concern among (central bank) directors, ... we see little reason for the directors to not cut the policy rate again in November," Tiago Severo, economist at Goldman Sachs, said. But not all analysts are convinced the central bank will take action at its next rate-setting meeting, on Nov. 19, which takes place two days after a general election. "The conditions that prompted the interest rate cut in October haven't deepened, and as such the central bank will hold the key rate steady at 4.75 percent in November," Matias Madrid, chief economist at Banco Penta, said. "They will then probably adjust their bias and cut by 25 basis points in December," he added. Traders polled by the bank last month said they expect the interest rate to be cut to 4.50 percent by February 2014. Core inflation in October was 0.3 percent in the month.