UPDATE 2-Mexico inflation eases for 4th month, rate cut bets ease
* January 12-month inflation 3.25 pct vs poll 3.18 pct
* Traders roll back short-term interest rate cut bets
* Cut still seen possible later in the year
MEXICO CITY, Feb 7 (Reuters) - Mexico's inflation cooled for the fourth month in a row in January to its lowest in more than a year but the higher-than-expected reading weakened bets on an imminent interest rate cut.
Consumer prices rose 3.25 percent in the year through January, the national statistics agency said on Thursday, slower than December's 3.57 percent increase but just above expectations for a rise of 3.18 percent in a Reuters poll.
January's figure is the lowest since October 2011 and closer to the central bank's 3 percent target, backing the central bank's argument from last month that cooling inflation could justify lower benchmark borrowing costs.
But Thursday's data pushed traders to retreat from bets the rate cut from 4.5 percent could come as soon as March or April.
"It's a rather low inflation figure but in the context of the huge bets in the market with respect to an imminent cut ... this number is crushing for those expectations," said Nomura analyst Benito Berber, who sees a possible cut in late 2013.
Yields on Mexican interest rate swaps bid higher after the data but the market is still tilting toward bets on a 50 basis point cut by June.
The fall in Mexican inflation contrasted with a pick-up in inflation in Brazil to 6.15 percent in January, near the top of the official target range.
The Mexican data showed core services inflation, which had fallen sharply in late 2012 on the back of mobile phone tariff discounting, accelerated as cell phone costs rose 21 percent in the month.
That took annual services inflation, a key gauge of home-grown price pressures, up to 1.62 percent. Still, non-food core goods inflation, the most sensitive to currency fluctuations, eased to 3.69 percent, showing the benefits of a stronger peso, which hit a 10-month high in January.
Consumer prices rose 0.4 percent last month, up from the 0.23 percent rate reported in December and above the 0.33 percent expected in a Reuters poll.
The January fall was bolstered by a 1.37 percent drop in fresh food prices in the month, especially tomatoes and chilies.
The core price index, which strips out some volatile food and energy prices, rose 0.42 percent in January, compared with an expected 0.30 percent increase and a 0.12 percent rise in December.
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