MEXICO CITY, Feb 7 (Reuters) - Consumer price inflation in Mexico rose to an eight-month high in January due mostly to new taxes on soft drinks, but the increase was less than expected, reducing the likelihood the central bank will raise interest rates in 2014.
Inflation in the 12 months through January was 4.48 percent, the national statistics agency said on Friday, up from December's 3.97 percent pace but lower than the 4.56 percent forecast in a Reuters poll.
Mexico's central bank has a limit of 4 percent for acceptable price gains, but policymakers have argued that the recent surge should fade during the year, since it was driven mostly by the one-time impact of new taxes.
Yields on Mexican short-term interest rate swaps dipped after the data as investors pared bets on an interest rate increase in the second half of the year.
Prices rose in the first half of January after the finance ministry rolled back fuel subsidies and a fiscal reform approved last year drove up prices on soft drinks and junk food.
Consumer prices rose 0.89 percent in January, above December's 0.57 percent increase yet lower than an expected 0.97 percent.
Core prices, which strip out food and energy costs because of their volatility, increased 0.85 percent after rising 0.33 percent in the prior month. Expectations were for a 0.90 percent rise.
The annual core rate rose to a more than one-year high of 3.21 percent from 2.78 percent in December as the tax increase pushed up costs of processed food.
Mexico's central bank kept its main interest rate on hold at a record low 3.50 percent last Friday, saying it would watch inflation expectations while also making sure a slump in the peso does not stoke further price pressures.
A Banamex poll of 25 analysts this week showed the median estimate is for the central bank to raise rates in March 2015.