(Adds analysts' comments, details, background)
By Selcuk Gokoluk
ANKARA, Feb 3 (Reuters) - Turkey's consumer prices rose a slightly more-than-expected 0.29 percent in January despite a sharp fall in clothing prices, official data showed in Tuesday, and analysts said it would not affect rate cut expectations.
The consumer price index (CPI) rose 9.50 percent from a year earlier, falling below 10 percent for the first time since April last year. Analysts had forecast a 0.10 percent month-on-month rise in the CPI.
"Inflation figures are broadly in line with expectations and we see disinflation continuing over the next few months, which should support the Central Bank's view of favouring a series of smaller rate cuts over the next months," said Fortis economist Erkin Isik.
"We expect a further interest rate cut this month of 50 basis points and then another rate cut of 50 basis points in March," Isik said.
Turkey's economy slowed sharply last year because of waning domestic demand and the global financial crisis, lessening inflation pressures. In the third quarter annual gross domestic product rose 0.5 percent - the slowest in six years.
The slowdown in growth combined with falling inflation has prompted the central bank to cut the borrowing rate by a larger-than-expected 325 basis points over its last two policy meetings. The benchmark overnight borrowing rate currently stands at 13.00 percent.
The producer price index rose 0.23 percent month-on-month in January, compared with a forecast rise of 0.20 percent, for an annual rise of 7.90 percent, the Turkish Statistics Institute said.
NO INFLATION WORRIES
The biggest rise in consumer prices was shown by the various goods and services group, which was up 3.23 percent month-on-month, while entertainment and culture prices rose 1.84 percent. Clothing and shoes prices fell 8.23 percent.
Retailers have sharply discounted prices in order to boost flagging consumer demand as the economy feels the impact of the global economic slowdown.
Turkey's government has been holding protracted talks with the International Monetary Fund on securing a new loan deal to bolster the economy and replace a $10 billion accord which expired in May. However, the talks have stalled due to disagreements over some details of the agreement.
Consumer food prices rose 1.46 percent month-on-month while housing prices were up 0.70 percent - figures which Yatirim Finansman economist Levent Durusoy said were above his expectations.
"I don't expect the Central Bank will be concerned by these figures. The Central Bank has made it clear it is not worried about inflation and sees it below target by the end of the year," he said.
"There are some strong disinflation drivers -- falling natural gas prices, weakening domestic demand," he added.
In a Reuters survey of 13 analysts last week, the January month-on-month CPI forecasts ranged between a fall of 0.20 percent and a rise of 0.40 percent.
The median 2009 inflation forecasts in the poll were 6.8 percent for CPI and 6.0 percent for PPI. (Additional reporting by Alexandra Hudson, writing by Daren Butler; Editing by Ron Askew)