WRAPUP 1-Chile June CPI, trade surplus up, rate cut seen

By Antonio de la Jara

SANTIAGO, July 7 (Reuters) - Chilean consumer prices rose 0.3 percent in June after a fall of 0.3 percent in May, while the trade surplus widened, data showed on Tuesday, reinforcing expectations the central bank will cut its key interest rate this week.

The data came a day after data showed Chile's slumping economy shrank 4.4 percent in May, a seventh consecutive monthly fall as a global crisis hammered mining and industrial output as well as forestry and fishing.

Chile's economy is expected to post its first annual contraction in a decade this year as the crisis lowers demand at home and abroad, and the central bank is seen cutting its target overnight lending rate on Thursday.

"Given the inflation data, a stronger fall in activity than that expected by the central bank and a fall in inflation expectations ... we think the central bank will cut rates by 25 basis points," said Cesar Guzman, an economist with the Grupo Security brokerage.

The central bank has cut its key rate by 750 basis points since the beginning of this year to a record low of 0.75 percent, leading the charge to cut rates in Latin America as inflation and economic activity wane.

The National Statistics Institute cited higher transport, housing, water, electricity, gas and fuel prices behind the June consumer price index reading, which came in above a median forecast for a rise of 0.1 percent expected by 10 economists and analysts polled by Reuters last week.

However, some analysts said they had slightly raised their forecasts since and considered the inflation reading to be broadly in line with expectations.

Currency traders said the inflation data helped boost the peso CLP= in early trade.

On an annual basis, inflation for the 12 months through June slowed to 1.9 percent from 3.0 percent for the year through May.

The core consumer price index, which strips out fuel, fresh fruit and vegetable costs, was flat in June after falling 0.3 percent in May and was up 3.6 percent in the 12 months through June.

Chile posted a trade surplus of $1.0275 billion in June, up 13.7 percent from a surplus of $903.9 million for the same month a year earlier, the central bank said.

For May, Chile posted a trade surplus of $956.4 million, the central bank reported last month.

Exports fell 30.1 percent in June, compared to the same month last year, to $4.09 billion, while imports fell 38.1 percent to $3.06 billion.

Chile's industrial output plunged 10.5 percent in May from the same month a year earlier, government data showed last week, while the unemployment rate hit a five-year high of 10.2 percent in the March-May three-month period.

Chile's gross domestic product contracted 2.1 percent in the first quarter compared with the same period last year, and the central bank and government have slashed their 2009 gross domestic product forecasts to a range between a 0.75 percent contraction and a 0.25 percent expansion. (Reporting by Rodrigo Martinez and Simon Gardner; Editing by Padraic Cassidy)