UPDATE 2-Mexico early-April inflation rises more than expected
* Inflation picks up to 4.72 percent in year to mid-April * Highest since Sept, above bets for 4.58 percent rise * Interest rate decision on Friday By Alexandra Alper MEXICO CITY, April 24 (Reuters) - Mexican inflation rose to a seven-month high in early April, rising further past the central bank's tolerance ceiling, and cementing expectations the central bank will hold interest rates steady on Friday, despite signs of weaker growth. Inflation rose to 4.72 percent in the year through the first half of April, the national statistics agency said on Wednesday, above expectations for a 4.58 percent pace in a Reuters poll and above the 4.12 percent rate in the year through March. A spike in food prices drove much of the recent rise in inflation. Mexican policymakers have grown increasingly confident in recent years about the economy's ability to shake off so-called supply-side shocks. The central bank is expected to hold its interest rate steady Friday at 4.0 percent after a cut in March, according to a recent Reuters poll. Policymakers will likely argue that the spike in prices will soon ease and they may highlight recent signs of economic weakness, which may point to further cuts later this year. "There is a reasonable chance that they come out dovish, signaling some sort of probability of a cut in the second half of the year," Nomura economist Benito Berber said. Inflation, which rose for a third straight month in April, has been on the upswing due in part to a low base of comparison last year. The uptick in the annual rate contrasted with a 0.09 percent drop in consumer prices in the first half of April, following a 0.52 percent rise in the first half of March. The decrease was less than the 0.23 percent drop analysts had forecast. The start of summer electricity subsidies tends to pull April prices down, though there is a new methodology for calculating inflation this month that is designed to mitigate the impact of lower power costs on inflation. Mexico's central bank cut its benchmark interest rate by 50 basis points in March to tame foreign capital inflows and tamp down the appeal of the peso, which has gained almost 5 percent against the U.S. dollar this year. The central bank has said it expects inflation to be below 4.0 percent by the start of the second half of the year, and on a downward path towards its 3.0 percent target by the end of 2013. Core prices, which strip out volatile goods like energy and food, rose 0.05 percent, lower than the 0.26 percent in the first half of March and compared with an expected 0.09 percent. The acceleration was driven by a rise in bus fares and prices of gasoline and green tomatoes. Annual inflation in services, a key gauge of home-grown price pressures, accelerated slightly to 2.39 percent and non-food core goods inflation, the most sensitive to currency fluctuations, dipped slightly to 3.02 percent.
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