* A private-sector inflation gauge falls 0.2 pct in Feb
* Business credit increases 0.6 percent in Jan
* Q4 business inventories fall 0.4 pct, profits down 2.8 pct
* RBA seen on hold at Tuesday's policy review
By Ian Chua
SYDNEY, Feb 29 (Reuters) - Inflation in Australia remained benign in February while demand for business credit grew at a healthy pace last month, a mix of data that offered hope for a pick-up in the economy and room for more cuts in interest rates in 2016 if needed.
A private survey on Monday showed consumer prices fell back in February, unwinding most of the rise seen at the start of the year. The benign inflation outlook should reassure the Reserve Bank of Australia (RBA) that it can keep policy loose for longer.
The survey from the Melbourne Institute showed consumer prices eased 0.2 percent in February, taking the annual pace down to 2.1 percent. A measure of underlying inflation pressure, the trimmed mean, was even lower at 1.7 percent, well below the RBA's 2-3 percent target band. RBA is considered almost certain to leave the cash rate at a record low 2.0 percent on Tuesday but maintain the option to ease later if necessary. AU/INT
The central bank is likely to be heartened by an encouraging rise of 0.6 percent in business credit last month, following on from a 0.5 percent increase in January.
"The sustained, albeit moderate, return to trend business credit growth does lay the foundations for some improvement in non-mining business investment," said National Australia Bank economist Tapis Strickland.
It is another indicator that suggests momentum in the non-mining economy continues into 2016, he said, adding the bank's view is for the RBA to be on hold.
Analysts are looking for signs of stronger growth this year as the economy struggles in the face of a sharp downturn in mining investments.
Indeed, quarterly data on Monday suggested the economy grew at a below-average pace late in 2015. Forth-quarter gross domestic product is due on Wednesday.
Figures from the Bureau of Statistics showed inventories fell 0.4 percent, when a 0.2 percent increase was expected. Wages grew a modest 0.5 percent in the quarter, while gross company profits fell by a more-than-expected 2.8 percent.
"Today's company profits and wage and salary data suggest that nominal GDP could have grown by only 0.5 percent in Q4," analysts at Citi wrote in a note to clients.
"Together with the decline in business inventories, this lowers our real GDP forecast slightly to 0.4 percent, which would yield steady annual growth at 2.5 percent."
The median forecast in a Reuters survey is for the economy to grow at a pedestrian 2.6 percent, down from the long-average of around 3.25 percent. ECONAU