* Inflation up at 3.85 percent in May, year on year
* Analysts say no impact yet from weak peso
* Central bank seen keeping interest rates on hold
MEXICO CITY, June 7 Mexican inflation
accelerated more than expected in May, but the rise is unlikely
to push the central bank into changing benchmark borrowing
The annual inflation rate rose to 3.85 percent in May, the
national statistics agency said on Thursday, above analysts'
expectations of 3.75 percent in a Reuters poll, and up from 3.71
percent in the first half of the month.
The latest data is a further step away from the central
bank's 3-percent long-term inflation goal, even though consumer
prices fell month-on-month for a second month in a row.
Analysts polled by Reuters last week were unanimous in
expecting the central bank, which says it can live with
inflation of up to 4 percent, to keep benchmark interest rates
on hold at 4.5 percent on Friday, and most see no change through
2013. Mexican rates have been unchanged since 2009.
Although several policymakers have said they would favor a
cut to support a gradual recovery from 2009's deep recession, a
slump in the peso to a three-year low last week has
fanned concerns about possible price pressures.
However, there is no sign so far of the weak peso raising
prices of imported goods. The biggest price increase in the
month was in fruit and vegetables, with a knock-on effect on
processed foods, but these were offset by a drop in electricity
prices due to summer subsidies.
Analysts said the rise in inflation also reflected
statistical base effects from May last year, when headline
prices fell by the largest amount on record, and price pressures
"It doesn't change our view that the inflation outlook
remains benign, there's very little pricing power in the
economy," said Standard Chartered economist Italo Lombardi.
"It really shows how much slack there still is in Mexico."
Producer price inflation accelerated to 5.55 percent, from
5.16 percent in April, with the biggest increase in the primary
sector, separate data showed.
While consumer price inflation is likely to trend higher in
the coming months, it should fall back to 3.65 percent by the
end of the year, according to a monthly central bank poll of
The latest inflation data showed consumer prices
had fallen 0.32 percent in May. Analysts had
forecast a 0.39 percent drop, according to a Reuters poll.
The Banco de Mexico has been looking closely at core
services inflation, which shows domestic price pressures.
Although this rose in the month and the annual rate accelerated
to 2.63 percent, it remains contained.
The goods component of the core index, which should show the
biggest impact from a weaker peso, decelerated to a 0.30 percent
increase on a monthly basis although the annual rate of 4.5
percent was above the central bank's tolerance level for
The overall core price index, which strips out some volatile
food and energy prices, rose 0.27 percent during May
from 0.15 percent in April, broadly in line with