* First fall in inflation in six months
* October inflation 4.60 percent; poll 4.66 percent
* Fruit and vegetable prices ease
By Alexandra Alper and Krista Hughes
MEXICO CITY, Nov 8 Mexico's annual inflation
slid off a 2-1/2-year high in October, backing the central
bank's forecast of an easing in the price pressures that have
plagued Latin America's No. 2 economy over the last five months.
Mexican consumer prices rose 4.60 percent in the year
through October, down from 4.77 percent in September and below
expectations in a Reuters poll for 4.66 percent, the national
statistics agency said on Thursday.
Consumer prices rose 0.51 percent last month,
above the 0.44 percent rate notched in September but below the
0.57 percent expected in a Reuters poll.
Inflation has been on an upward trend since April. Despite
the welcome fall in October, it was still the fifth straight
month above the central bank's 4 percent tolerance limit.
On Wednesday the central bank said inflation had peaked and
would end the year very close to 4 percent. But central bank
governor Agustin Carsten said the bank could tighten interest
rates soon if price pressures rose again - as a preventive
The October data eased concerns that recent food shocks
would hit prices of other less volatile goods.
"The central bank's fears didn't materialize," said Ezequiel
Aguirre, currency strategist at Bank of America in New York. "We
are seeing what we expected, a decrease in volatile inflation in
energy and foods that is contributing to a decrease in headline
and core inflation."
Inflation has been pushed upward by fresh food prices as the
cost of eggs and chicken rose following an outbreak of avian flu
in western Mexico and bad weather damaged crops.
But data showed a 1.41 percent drop in fruit and vegetable
prices in October, which helped ease the headline rate.
The core price index, which strips out some
volatile food and energy prices, rose 0.23 percent in October,
compared with an expected 0.26 percent and a 0.18 percent rise
Annual inflation in services, a key gauge of home-grown
price pressures, was steady at 2.25 pct, and non-food core goods
inflation, the most sensitive to currency fluctuations, picked
up slightly to 4.00 percent.
GROWTH AND THE PESO
Banco de Mexico, which has an inflation target of 3 percent
with a one percentage point tolerance band, has held interest
rates at 4.5 percent since mid-2009.
Yields on Mexican interest rate swaps edged lower
as investors cut bets on the chance of an interest rate hike
The central bank said a stronger peso and an expected
deceleration in growth in the second half of the year would help
tame inflation as a global slowdown dragged on Mexico.
The peso's gain of about 6.8 percent against the
dollar so far this year is one of the biggest against the
greenback among 152 currencies tracked by Reuters.
The stronger peso - which has rebounded about 12 percent
against the dollar after hitting a more than three-year low in
early June - should help limit imported goods prices, but peso
moves normally take four to six months to feed into the index.
The central bank expects growth of between 3.5 percent and
4.0 percent in 2012, an easing from the 4.3 percent rate in the
first half as the global slowdown begins to bite.
Separate data on Thursday showed producer prices fell 0.02
percent in October, for an annual rate of 3.35 percent.