(Recasts, adds detail and background)
* Annual inflation falls for first time in three months
* Yields drop on interest rate futures
* Food prices pressure inflation less
MEXICO CITY, Sept 24 Mexico's annual inflation fell in early September for the first time in three months, suggesting a price spike driven by soaring world food prices may be ending.
Twelve-month inflation in the first half of September was 5.42 percent, down from a more than five-year high of 5.57 percent at the end of August, the central bank said on Wednesday.
Less pressure came from food prices than during the year-ago period, the bank said.
Increased food demand from China and other Asian countries, along with surging oil prices, has boosted inflation around the world for much of 2008, although experts have recently predicted the worst of the crisis has passed.
Mexico's central bank held its key interest rate steady on Friday, breaking a three-month string of hikes after it said it sees the inflation spike nearing its end.
"The discussion will now shift to when the central bank will cut," said RBS Greenwich Capital economist Benito Berber, whose forecast for early-September inflation was in line with the reading.
Yields on interest-rate futures fell <0#TII:> after the data was released as investors pared bets that the central bank could raise interest rates in coming months.
In the first two weeks of the month, school fees and energy helped push the consumer price index MXCPIF=ECI up 0.44 percent, less than the 0.57 percent expected by analysts in a Reuters poll.
Core inflation MXCPIH=ECI, which strips away some volatile food and energy prices, in early September was 0.41 percent.
Inflation concerns in recent weeks have been overtaken by worries that a financial crisis in the United States could further hamper world growth. Still, costs continue to rise at filling stations in Mexico as the government scales back on an energy subsidy.
The last time Mexico's annual inflation rate fell was at the end of June, when it dipped to 5.26 percent. (Reporting by Noel Randewich and Jason Lange; Editing by Jan Paschal)