Aug. 11 (Bloomberg) -- Chile's central bank will probably increase its benchmark lending rate for a sixth time this year in an attempt to slow accelerating inflation.

The bank will boost the overnight rate a quarter percentage point to 3.75 percent from 3.50 percent, according to the median estimate of eight analysts in a Bloomberg survey. Policy makers since September have pushed lending rates up from a record low of 1.75 percent. Inflation in South America's fifth-largest economy rose to a two-year high in July, the government said on Aug. 4.

``They have had some increase in inflation in the last three or four months,'' said Alberto Ramos, senior economist for Latin America for Goldman, Sachs & Co. in New York.

Inflation has quickened in the $94 billion economy as the cost of oil has surged 54 percent this year and economic growth has accelerated. Consumer prices rose 0.6 percent in July, double the 0.3 percent median estimate from a Bloomberg survey, pushing the annual rate to 3.1 percent.

Chile is the world's biggest producer of copper, which has risen to record highs this year on increased demand from China and the U.S., the world's two biggest users of the metal.

The economy expanded 6.4 percent in June, its fastest pace of growth in five months. The government forecasts the economy will grow 6 percent this year, following last year's expansion of 6.1 percent, the highest annual growth rate in seven years.

``The economy continues to do very well, suggesting that there isn't going to be any reduction in inflationary pressure,'' said Suhas Ketkar, a Latin America economist with Royal Bank of Scotland Plc in Greenwich Connecticut. `` Oil prices are the immediate driver for inflation.''

Outlook

Strong growth and rising inflation have led to speculation that the central bank will raise rates by 50 basis points, which Goldman Sachs' Ramos said would be too drastic.

`` We see no need or urgency to go to a 50-basis-point increase at this time,'' Ramos said.

The rate will increase to 4.5 percent by year-end, he said.

That's higher than the median estimate of 4.25 percent from a central bank survey of 40 analysts. Inflation will rise to 3.3 percent in December, according to the survey. The bank targets annual inflation of 3 percent.

``It's part of the gradual process of moving closer to a neutral stance'' on providing economic stimulus, said Felipe Morande Lavin, an economist from the Universidad De Chile, in a phone interview in Santiago. Morande Lavin was the head research economist at the Chilean central bank until November 2001.

Along with four other economists from three Chilean universities who study monetary policy, Morande Lavin recommends that the central bank raise rates 25 basis points at each meeting until December, bringing their year-end target to 4.5 percent.

Central bankers are scheduled to make an announcement on rates following their meeting this afternoon in Santiago.

To contact the reporter on this story: Matthew Walter in New York at mwalter4@bloomberg.net

Last Updated: August 11, 2005 08:03 EDT