UPDATE 2-Chile Oct inflation flat after 1 pct rise in Sept

* Chile's CPI flat in October, rose 1 pct in September

* CPI fell 1.9 pct in 12-month period through October

* Core CPI flat in October, rose 0.7 pct in September (Adds analyst comment, growth data)

SANTIAGO, Nov 6 (Reuters) - Chile's consumer price index was flat in October, in line with market expectations, as lower transport and gas costs offset a rise in fruit and vegetable prices, government data showed on Friday.

The unchanged data compares to a bigger-than-expected 1 percent rise in consumer prices in September. Chile's central bank has forecast a 0.8 percent decline in prices for 2009 and inflation of 2.8 percent for 2010 as economic growth returns after the ravages of global financial crisis.

On an annual basis, the consumer price index fell 1.9 percent in the 12 months through October, the National Statistics Institute said. In October of 2008, consumer prices rose 0.9 percent.

Core CPI, which strips out fuel, fresh fruit and vegetable costs, was also unchanged in October after rising 0.7 percent in September.

In the 12-month period through October, core CPI fell 0.4 percent compared with a 0.2 percent increase in the 12-month period through September.

The inflation data came a day after Chile's economic activity index, the IMACEC, fell by a steeper-than-expected 1.1 percent in September from the same month a year ago, hit by a drop in industrial output which cast a cloud over economic recovery hopes.

"We still have disappointing growth and deflation," said Kathryn Rooney, senior macro economic strategist with Bulltick Capital Markets in Miami. "I tend to look on the bright side because I think that all the factors are in place for growth to rebound."

"Inflation is unlikely to become actually positive until growth rebounds, and I think that comes in the fourth-quarter of this year," she added.

Chile has injected billions of dollars as part of a stimulus plan to jump-start the sluggish economy amid a global slowdown. Chile's central banks has slashed interest rates to record lows to spur lending in the world's top producer of copper.

The Chilean economy is expected to contract 1.5 percent to 2 percent this year, according to the central bank. Growth for next year is forecast at between 4.5 percent and 5.5 percent. (Reporting by Antonio de la Jara and Aaron Nelsen; Writing by Simon Gardner; editing by W Simon)