UPDATE 4-Mexico central bank raises inflation forecast
(Recasts; adds details and background)
By Noel Randewich and Luis Rojas Mena
MEXICO CITY, April 30 (Reuters) - Inflation in Mexico will accelerate faster than previously expected as prices for things like wheat and tomatoes rise at an uncomfortably quick pace, the central bank said on Wednesday.
That could keep pressure on policy makers to keep borrowing costs high despite a slowdown in the economy that the central bank said would be worse than in previous forecasts.
However, central bank governor Guillermo Ortiz said he thinks a current spike in inflation will be short-lived because a worldwide surge in food costs likely won't spread to other prices in Mexico.
"We are certainly not comfortable with current levels of inflation," he said, but added: "The expectation is that ... prices and wages will not be contaminated."
Some investors over the past week have been betting the bank's next move will be to hike rates, though interest rate futures TII: on Wednesday showed market players were paring those bets after the bank released its inflation report.
Policy makers on April 18 held the benchmark overnight rate at 7.50 percent for the sixth straight month. Central banks lower borrowing costs to stimulate economic growth and raise them to keep economies from overheating.
Ortiz said Mexico's economy will grow between 2.40 and 2.90 percent, down from the bank's previous estimate of 2.75 to 3.25 percent. Continued...
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