May 9, 2016 / 1:54 PM / 2 years ago

UPDATE 1-Mexico inflation cools further below central bank target

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    MEXICO CITY, May 9 (Reuters) - Mexico's annual inflation
cooled in April further below the central bank's 3 percent
target, giving policymakers room to keep interest rates on hold
amid concerns about a weak currency.
    Inflation in the 12 months through April cooled to 2.54 
percent, the national statistics agency said on Monday. That
compared with a forecast of 2.61 percent in a Reuters poll and
2.60 percent in March.
    After falling to a record low in 2015, inflation in Latin
America's No. 2 economy is posting the longest period on record
below the central bank's 3 percent target. 
    The central bank said last week, when it held interest rates
steady, that it expects inflation to creep up above 3 percent
later this year but to fall back to target by the end of 2016.
    Mexican policymakers unexpectedly hiked interest rates in
February to support the peso, which has tumbled since late 2014
to record lows amid the slump in oil prices and worries about
global growth. 
    Last week, Mexico's central bank suggested it could hike
again if currency weakness fans inflation expectations but
policymakers said there was no sign yet of widespread price
pressures from the weak peso. 
     While the peso recovered some ground after the
February hike, the currency fell sharply last week and again on
    The new data showed consumer prices fell 0.32
percent in April, a bigger drop than estimates of a 0.25 percent
decrease, falling on summer electricity price subsidies and
lower tomato and onion prices. 
     The core index, which strips out some volatile food and
energy prices, rose 0.22 percent during the month,
higher than a 0.19 percent seen in the poll.
    The 12-month core inflation rate rose to 2.83 percent, the
highest rate since December 2014. That was above a forecast of
2.8 percent and a 2.76 percent rate in March.

 (Reporting by Michael O'Boyle; Editing by Chizu Nomiyama)
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