January 9, 2017 / 2:36 PM / a year ago

UPDATE 3-Mexico inflation at 2-year high, may rise after fuel hike

(Adds Uber, Cabify, and electricity price hikes)
    MEXICO CITY, Jan 9 (Reuters) - Mexico's December annual
inflation rose at the fastest pace in two years, data showed on
Monday, boosting chances the central bank will raise interest
rates again at a time when prices are expected to be further
fanned by a hike in fuel costs.
    Consumer prices rose 3.36 percent from December
2015, national statistics agency INEGI said on Monday, the
highest rate since December 2014, and above the central bank's 3
percent target.
    The figure was below the 3.40 percent analysts forecast in a
Reuters poll but up from 3.31 percent in November.
    Consumer prices should rise faster after a double-digit hike
in gasoline prices went into effect this month, some analysts
said. The increase has spurred protests, looting and blockades
throughout the country. 
   "We expect a much more accentuated rise in January,"
CitiBanamex said in a note, citing energy prices and a weak
peso. The bank said inflation would surge beyond 4.6 percent on
an annual basis.
    Already, the fuel hike has prompted ride-hailing service
Uber to raise user fees by 15 percent in Mexico City,
while rival Cabify followed suit with a 6 percent fare increase
announced on Monday.
    Mexican authorities have also boosted electricity prices for
certain sectors by 2.6 to 4.5 percent.     
    Last month, Mexico's central bank raised interest rates for
the fifth time in 2016, to 5.75 percent, taking borrowing costs
to the highest level since April 2009. 
    In minutes of the central bank meeting, board members said
they would remain attentive to potential pass-through from the
exchange rate to inflation, after Donald Trump's presidential
election win sent the peso to new lows on fears he would disrupt
U.S. economic ties with Mexico. 
    Mexico's central bank sold dollars last week to shore up the
peso in its first such intervention since February 2016 but
Capital Economics said in a client note that interest rates
would have to rise further to contain consumer prices.
    A poll released by Citibanamex last week showed analysts
expected an increase of 50 basis points at Banco de Mexico's
February meeting.
    Consumer prices rose 0.46 percent on the month
in December, according to non-seasonally adjusted figures,
boosted by an increase in tourist services, airfares and eggs.
    The core index, which strips out some volatile food and
energy prices, rose 0.45 percent during the month.

 (Reporting by Alexandra Alper and Miguel Gutierrez; editing by
Bill Trott and Andrew Hay)
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