UPDATE 1-Mexico annual inflation rate rises to 5-month high in July
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MEXICO CITY Aug 7 (Reuters) - Mexico's annual inflation rate in July climbed above the central bank's 4 percent target ceiling to a five-month high, but policymakers expect the rise to be brief as sluggish economic growth contains price pressures.
Inflation in the 12 months through July rose 4.07 percent, the national statistics agency said on Thursday.
That was higher than a 3.75 percent annual rate in June and expectations for a 4.05 increase in a Reuters poll. It was the fastest pace since February.
The Mexican central bank held its benchmark rate steady in July after a surprise cut in June to a record low of 3.00 percent. Policymakers said slack in the economy gave it room to lower borrowing costs without fanning inflation.
The country's central bankers have said they expect temporary factors to drive the annual rate to around 4 percent during the second half of the year before it falls back toward 3 percent by early 2015.
Mexico targets a 3 percent inflation rate, plus or minus one percentage point. The central bank is expected to hold borrowing costs steady until around the middle of next year, when the U.S. Federal Reserve is seen raising its main rate.
Consumer prices rose 0.28 percent in July from June, compared to estimates for a 0.26 increase, as tomato prices rose sharply.
Core inflation, which strips out some volatile food and energy costs, increased 0.19 percent, in-line with expectations, driven mostly by higher tourism services prices. (Reporting by Michael O'Boyle; Editing by Nick Zieminski)
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