May 24, 2017 / 2:10 PM / a year ago

UPDATE 1-Mexico inflation rises to over 8-year high in early May

 (Recasts with annual inflation rate)
    MEXICO CITY, May 24 (Reuters) - Mexican annual inflation
rose more than expected in early May to hit its fastest pace in
more than eight years, which could presage further interest rate
hikes from the central bank.
    Inflation for the year through mid-May was 6.17 percent
            , the national statistics institute said on
    The figure was the highest since early April 2009, above
expectations of economists polled by Reuters who predicted 6.10
percent price growth.  
    To check inflation, Mexico's central bank last week
unexpectedly hiked its benchmark interest rate by 25 basis
points to 6.75 percent             , its highest level since
March 2009.             
    A deep slump in the peso last year helped push up prices,
but a recent rally in the currency could help contain
inflationary pressures.
    The core price index             , which strips out some
volatile food and energy prices, rose 4.75 percent in the
12-month period to mid-May, above the 4.71 percent forecast in a
Reuters poll.
    In the first half of May, consumer prices fell 0.34 percent
             as summer electricity subsidies kicked in, while
the core price index              climbed 0.15 percent.
    Higher prices have so far not crimped consumer demand, with
same store sales rising every month this year.  
    Earlier this week, Mexico revised its official 2017 gross
domestic product growth estimate upward, shortly after
government data showed the economy was largely shrugging off
fears that U.S. President Donald Trump's trade policies would
wreak havoc on exports and investment.
    Mexico's finance ministry said in a statement it was raising
its 2017 growth forecast to 1.5 percent to 2.5 percent from its
previous range of 1.3 percent to 2.3 percent.             

 (Reporting by Mexico City newsroom; Editing by W Simon)
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