WRAPUP 3-Chile ups policy rate despite July growth surge

* Chile Central Bank ups policy rate by 50 bps to 8.25 pct

* Chile economy grows 6.2 pct in July, above expectations

* Chile 12-month inflation moderates to 9.3 pct in August (Recasts with interest rate hike)

By Antonio de la Jara

SANTIAGO, Sept 4 (Reuters) - Chile's central bank raised its overnight lending rate by 50 basis points for a fourth month running to 8.25 percent on Thursday, as the economy grew faster than expected in July and rampant inflation moderated only slightly.

Eighteen of 20 economists and traders polled by Reuters had predicted the bank would raise the rate by 50 basis points at its monthly monetary policy meeting in a bid to rein in inflation running at the quickest pace in 14 years.

The policy rate is now at its highest level since late 1998, and the bank signaled further increases could follow.

"It is in line with what was signaled in the minutes of the central bank. The 50 basis point increase is good given the latest data," Miguel Cardoso, chief economist at BBVA, told Reuters.

"It is the right course of action given the risks out there," he added, forecasting yet another 50 basis point increase in October.

While the likes of the European Central Bank and Bank of England held benchmark rates steady on Thursday, feeding investor belief that the international rates cycle could be peaking, some analysts believe Chile's interest rates could head towards 9 percent by the year-end.

August inflation data showed 12-month inflation still at triple the central bank's target rate of 3 percent annual inflation, with a leeway of minus or plus 1 percentage point.

MORE HIKES ON WAY?

"Given the adverse inflationary panorama, this increase in the policy rate is necessary to ensure inflation converges towards 3 percent," the central bank said in a statement.

"The future trajectory of monetary policy envisions further adjustments to ensure convergence on the target at a rhythm that will depend on new information and its implications on inflation projections," the central bank added.

The National Statistics Institute (INE) said the consumer price index rose 9.3 percent in the 12 months through August. That was slightly less than the 9.5 percent inflation in the 12 months to July -- which marked the highest annual inflation seen in 14 years.

"Twelve-month inflation has been rising nearly every month since April 2007," Finance Minister Andres Velasco told reporters. "What have we seen in the last month? That 12-month inflation is slowing slightly."  Continued...