January 24, 2018 / 3:15 PM / a year ago

UPDATE 1-Mexico inflation slows in January, rate hike still expected

 (Adds background on inflation expectations, details on analyst
rate hike expectations)
    MEXICO CITY, Jan 24 (Reuters) - Mexican annual inflation
slowed more than analysts expected in the first half of January,
data from the national statistics agency showed on Wednesday,
but the central bank was still seen raising interest rates at
its February meeting. 
    As predicted earlier this month by Banco de Mexico governor
Alejandro Diaz de Leon, inflation eased on an annual basis after
2017 gasoline price increases faded from the national index.
Annual inflation in the first half of January was 5.51 percent,
below the 5.62 percent expected by analysts in a Reuters poll. 
    Last year, Mexico's inflation rate climbed to a 16-1/2-year
peak of 6.77 percent, the highest annual rate since the 12
months to May 2001, according to data published by Inegi earlier
in January.             
    Mexico's central bank raised its benchmark interest rate in
December by 25 basis points to 7.25 percent, the highest level
in nearly nine years.
    The central bank's board will meet on Feb. 8, and analysts
said the bank would likely still hike rates at the meeting.
    Banco Base said in a statement that the chances of the bank
hiking rates were 60 percent due to "the most recent inflation
data, the likelihood of the Fed maintaining its normalization of
interest rates, and an exchange rate of 18.50 pesos per dollar."
    Mexico's peso          strengthened 0.71 percent in early
trading to 18.56 pesos per dollar. 
    The data also showed consumer prices rose 0.24 percent
during the first half of January, while the closely watched core
price index             , which strips out some volatile food
and energy prices, climbed 0.17 percent.

 (Reporting by Gabriel Stargardter; Editing by Meredith
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