UPDATE 2-Chile cenbank holds 2007 GDP forecast, ups inflation

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VALPARAISO, Chile, May 16 (Reuters) - Chile's central bank said the nation's economy will likely see growth that is toward the upper end of its forecast range of 5.0 to 6.0 percent in 2007, as prices for No. 1 export copper sustain higher-than-expected levels.

At its thrice-yearly report to Congress on Wednesday, the central bank said it maintained its forecast range for economic growth, but it raised estimates for inflation this year, which analysts said would close the door on further rate cuts.

After anemic 4 percent growth in 2006, gross domestic product (GDP) growth has risen to nearly 6 percent in the first part of 2007.

"It's likely to be at the upper end of the forecast rather than at the lower end," Central Bank President Vittorio Corbo told the Senate finance committee in Valparaiso.

The bank also raised its inflation estimate for 2007 to 2.8 percent from an earlier estimate of 2.3 percent.

"It makes it less likely you're going to have rate cuts this year, which is where the street has moved anyway," said Ben Laidler of UBS Pactual in Santiago.

The rate came in below the bank's target inflation rate of 3 percent with a short-term band of 2 to 4 percent, so the new forecast did not raise concerns about rate increases.

"It's still below the middle of the band so interest rate increases are not likely either," said Bertrand Delgado, an economist with IDEAglobal in New York.

The bank said it expected the price of copper, which accounts for over half of the country's export revenue, to average around $2.90 per pound this year, up from its estimate of $2.30 per pound in January.

Copper prices are near $3.50 per pound these days, bolstered by continued demand from China's booming economy as well as from the United States and Europe.

"Given recent trends in copper prices, price projections for 2007 as well as 2008 have been raised." Corbo said.

Along with firmer prices for copper, the central bank predicted Chile would run a trade surplus of $22.3 billion in 2007, 57 percent higher than projections in January for a surplus of $14.2 billion.

(Additional reporting by Lisa Yulkowski)