UPDATE 1-Mexico inflation rises faster than expected from record low
(Recasts with rise off record low) MEXICO CITY, Feb 9 (Reuters) - Mexico's annual inflation rose faster than expected in January from a record low, partly reflecting a deep slump in the peso, while a steeper pace of price gains ahead is expected to spur more interest rate hikes. Inflation in the 12 months through January rose to 2.61 percent, above a 2.52 percent forecast in a Reuters poll and up from a 2.13 percent rate in December. Mexico posted record lows in its annual inflation rate every month since last May, the longest period ever in which price gains stayed below the central bank's 3 percent target, but big currency losses are seen pushing prices higher this year. 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 lifting borrowing costs further to help support the peso as U.S. borrowing costs rise. Last week, the central bank held interest rates steady but said it would monitor increasing risks to inflation from sharp losses in the peso, which shed more than 5 percent in January after a nearly 17 percent drop in 2015. The central bank expects inflation to climb back to around 3 percent in 2016, under pressure from the weaker peso, but the pace of gains is far lower than elsewhere in Latin America. Consumer prices rose 0.38 percent in January compared with the prior month, above a forecast 0.28 percent, driven higher by jump in onion and cooking gas prices. The core index, which strips out some volatile food and energy prices, rose 0.19 percent from December, just below an estimated 0.21 percent. The 12-month core inflation rate rose 2.64 percent compared to a forecast 2.65 percent and up from 2.41 percent in December, reflecting modest pressure from higher import prices due to the weak peso. (Reporting by Michael O'Boyle; Editing by Nick Zieminski)
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