(Adds economic activity data)
By Alexandra Alper and Michael O'Boyle
MEXICO CITY, Sept 24 (Reuters) - Mexican annual inflation remained above the central bank's tolerance ceiling in early September but cooled slightly versus late August, suggesting that policymakers will hold borrowing costs steady at a record low for some time.
A separate report showed Mexico's economy grew at its fastest pace in three months in July, in a sign that Latin America's No. 2 economy is picking up after a weak start to the year.
Inflation for the 12 months through the first half of September slowed to 4.21 percent, below the 4.23 percent rate reached in the second half of August, national statistics institute data showed on Wednesday.
The figure was still above expectations for a 4.15 percent rise in a Reuters poll and the 4.15 percent rate for the full month of August.
A jump in fresh meat prices drove inflation above the central bank's 4 percent ceiling in August but policymakers expect the pace of consumer price gains to keep cooling and fall near its 3 percent target rate in the first half of next year.
The bank cut its benchmark rate to 3 percent in June and has held steady since then, arguing that sluggish growth would contain price pressures through next year.
Consumer prices rose 0.32 percent in the first half of August, compared with forecasts for a 0.27 percent rise.
Core consumer prices, which exclude some volatile food and energy prices, rose 0.24 percent, just above expectations for a 0.22 percent rise.
A separate report showed Mexico's economy grew 0.41 percent in July from June when adjusted for seasonal swings, compared with expectations in a Reuters poll for 0.2 percent and the upwardly revised 0.27 percent expansion in June.
The services sector expanded 0.34 percent in July compared with the prior month.
The Mexican economy grew 2.52 percent compared with July of 2013, the institute said, versus an expected 2.6 percent rate and the upwardly revised 2.74 percent expansion seen in June.
Mexico's economy is seen growing around 2.5 percent this year from a 1.4 percent rate in 2013. (Editing by W Simon and Simon Gardner)