UPDATE 3-Mexico inflation down in early Dec; key reading up

(Updates with minimum wage hike, last paragraph)

MEXICO CITY, Dec 21 (Reuters) - Mexican 12-month inflation fell in early December, but closely watched core prices rose faster than expected as the central bank braces for a spike expected to hit next year.

Consumer prices MXCPIF=ECI rose a lower-than-expected 0.20 percent during the first two weeks of the month, the central bank said on Friday. Analysts polled by Reuters had forecast prices to rise 0.30 percent.

That brought annual inflation down to 3.68 percent from 3.93 percent at the end of November amid falling prices for vegetables like zucchini and tomatoes.

However, the key core inflation reading MXCPIH=ECI, which strips out some volatile food and energy prices, was a higher-than-expected 0.33 percent during the first two weeks of the month.

Investors pay special attention to core prices because they can suggest where inflation will trend over the coming months.

"The part about core is not good news," said Rafael Camarena, an economist at Santander in Mexico City.

Camarena said that could put pressure on the central bank to raise interest rates next year, though Santander is not expecting a change in monetary policy before March.

Mexico held its benchmark overnight rate steady this month at 7.50 percent after two 25-basis-point hikes this year, as concern over a possible U.S. slowdown weighed against inflation fears.

But the bank has warned that higher food prices and a planned tax hike will likely keep inflation above the 4 percent rate it considers acceptable for next year.

The government agreed on Friday to a 4-percent increase in Mexico's minimum wage for 2008 with companies and workers, in line with the central bank's inflation goal. (Reporting by Jason Lange and Luis Rojas, editing by Richard Chang)