March 23, 2017 / 2:44 PM / a year ago

UPDATE 1-Mexico inflation rises at fastest pace in nearly 8 years

 (Adds historical comparison)
    MEXICO CITY, March 23 (Reuters) - Mexican annual inflation
rose at its fastest pace in nearly 8 years in early March,
prompting central bank chief Agustin Carstens to hint at higher
interest rates to combat an inflation "bubble" he said would
subside later in the year.
    The headline inflation rate for the year through mid-March
was 5.29 percent             , the national statistics institute
said on Thursday. The figure was the highest since the second
half of February 2009, and was above expectations of economists
polled by Reuters for 5.25 percent.
    Mexico's central bank raised its benchmark interest rate
last month to a nearly eight-year high after a steep hike in
gasoline prices and weakness in the peso sparked by Donald
Trump's election as U.S. president. 
    Just after the data was published, Carstens said the central
bank had room to continue adjusting rates. 
    The peso has recovered as U.S. officials have taken a more
conciliatory tone towards Mexico and the U.S. Federal Reserve
said it would stick to gradual interest-rate increases. 
    Still, many analysts expect the central bank to lift rates
again on March 30 following the Fed as inflation climbs. 
    The core price index             , which strips out some
volatile food and energy prices, rose 4.32 percent in the
12-month period to mid-March.
    The figure was above the 4.29 percent forecast in a Reuters
    In the first half of March, consumer prices rose 0.35
percent              while the core price index             
climbed 0.31 percent.

 (Reporting By Alexandra Alper and Miguel Angel Gutierrez;
Editing by Bernadette Baum)
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