UPDATE 1-Mexico inflation falls to record low in Dec, but seen rising
(Recasts with record low, adds background, graphic) MEXICO CITY, Jan 7 (Reuters) - Mexico's annual inflation cooled to a record low in December but consumer prices are seen rising this year and the central bank is expected to keep raising interest rates to defend the peso. Inflation in the 12 months through December cooled to 2.13 percent, the national statistics agency said on Thursday, below the 2.21 percent rate in November but above the 2.08 percent forecast in a Reuters poll. Mexico has been posting record lows in its annual inflation rate since last May, marking the longest period ever where the pace of consumer price gains has stayed below the central bank's 3 percent target. However, policymakers in Latin America's No. 2 economy raised interest rates in December following a move by the U.S. Federal Reserve. Mexico is seen hiking further with the Fed to help support the peso as U.S. borrowing costs rise. Mexico's currency slumped to another record low on Thursday following steep losses last year. Currency weakness is expected to pressure on consumer prices this year and the central bank expects inflation to rise back to around 3 percent in 2016. The 12-month core inflation rate rose to 2.41 percent from 2.34 percent in November, in-line with estimates. Consumer prices rose 0.41 percent in December, above the poll's expectations for an advance of 0.35 percent. The core index, which strips out some volatile food and energy prices, rose 0.31 percent during the month, below the poll's expectations for an advance of 0.34 percent, helped by a drop in mobile telephone rates. (Reporting by Michael O'Boyle; Editing by Bill Trott)
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