Chile stocks slump on rates, inflation, peso firms

(Adds quote, closing stock figures)

SANTIAGO, July 2 (Reuters) - Chilean shares closed sharply lower on Wednesday on growing expectations of a further interest rate hike, while the peso ended a nine-session decline as the dollar softened on global markets.

The blue-chip IPSA index .IPSA slid 3.82 percent to 2,839.89 points while the all-market IGPA .IGPA index fell 3.15 percent to 13,847.56 points, the biggest one-day drop since January.

"I think the most important effect locally is the expectation for an increase in the consumer price index of 1.2 percent, which could lead the bank to raise the key rate by 50 basis points," said Rodrigo Ibanez, an economist with the Banchile brokerage.

"Elevated oil prices and the exchange rate are also generating inflationary pressures."

Global stocks slumped on Wednesday amid higher oil prices and inflation fears, but analysts said Chile's bourse was also affected by central bank comments regarding further rate hikes despite last month's aggressive increase to 6.75 percent.

"The comments by (Central Bank President Jose) De Gregorio are just one more factor reinforcing the view for higher rates," said Ibanez.

Chile's government is scheduled to report inflation data on Thursday morning and the central bank will make its monthly rate decision next week.

Raw materials and retailer issues led broad losses on the blue-chip exchange, with fertilizer producer SQM SQM_pb.SN slumping 9.00 percent, and iron ore exporter CAP.SN falling 6.14 percent.