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UPDATE 1-Chile Sept inflation 'surprised everyone' -central bank president

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By Dion Rabouin

WASHINGTON, Oct 12 (Reuters) - Chilean Central Bank President Mario Marcel told Reuters that consumer prices falling 0.2 percent in September "surprised everyone" and the bank would analyze whether the data would alter the pace of prices converging toward its 3 percent inflation target.

Marcel said in an interview on Thursday that September is usually positive for seasonal reasons, and while half of the negative reading had to do with food prices, part of it had to do with core inflation.

"It's something that we will have to look into from the perspective of how and whether it may alter convergence toward the 3 percent target. It may or it may not," he said.

The central bank uses convergence toward the 12-month target as its basis for monetary policy. A poll of traders this week showed the market expects the central bank to hold its policy rate steady at 2.5 percent until at least the final quarter of 2018.

Marcel, who was appointed a year ago, said that economic expectations had been improving for more than half a year, and while business expectations had been a bit more volatile, they were also positive.

He said consumption and exports have been growing steadily, but admitted "what we have not yet seen is a rebound in investment."

"That would be needed to generate more sustainability over time," he said.

Marcel said Chile's economy also benefited from net debt close to zero.

"It's true that there has been a deficit, but we are still at a very low level of public debt, so there is nothing constraining the Chilean economy from taking advantage of financial market conditions," he said.

(Reporting by Dion Rabouin; editing by Caroline Stauffer, Peter Cooney and Jonathan Oatis)

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