June 23, 2016 / 1:57 PM / 2 years ago

UPDATE 2-Mexico inflation cools in early June; economy slumps in April

(Adds economic activity data for April)
    MEXICO CITY, June 23 (Reuters) - Mexico's annual inflation
rate cooled in early June despite a pickup in the core number,
and separate data showed on Thursday that the economy took its
biggest plunge in more than five years as industry and services
    Despite relatively tame inflation and weak growth, a steep
slump in the peso could push policymakers to raise interest
rates soon.
    Inflation in the 12 months through mid-June was 2.55 percent
, the national statistics institute said. That was
below a forecast of 2.63 percent in a Reuters poll and the 2.6
percent rate at the end of May. 
    But the closely watched core price index, which
strips out some volatile food and energy prices, crept up to
nearly 3 percent in early June, and policymakers are concerned
that a prolonged peso slump could hit inflation.
    The peso is down nearly 6 percent against the greenback this
year but has recovered somewhat this week.
    A separate report showed that Mexico's economy shrank 1.2
percent in April from March, the largest fall since January 2009
. On an annualized basis, economic activity expanded
3.0 percent.  
    Mexico's central bank may raise interest rates at its next
meeting on June 30, but bets in the interest rate swap market
are divided .    
    Consumer prices rose 0.02 percent in the first half of June
, compared with expectations of 0.11 percent.
    The core price index climbed 0.16 percent in early June,
compared with forecasts for a 0.14 percent increase. 
    The 12-month core inflation rate rose to 2.98 percent
, slightly above the poll's expectations of 2.96

 (Reporting by Alexandra Alper, Michael O'Boyle and Christine
Murray; Editing by Lisa Von Ahn)
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