* Inflation accelerates to 3.47 percent in year to
* Unemployment rises to highest in over a year
* Central bank chief says still might cut interest rates
By Alexandra Alper and Michael O'Boyle
MEXICO CITY, Feb 22 Mexico's inflation
accelerated more than expected in early February, but the blip
higher is unlikely to worry the central bank as it argues a
steady downtrend in consumer prices may justify lower borrowing
Annual inflation picked up to 3.47 percent in the first half
of February, the national statistics agency said on Friday,
above expectations for a rise to 3.4 percent in a Reuters poll
and a 3.21 percent rate notched in the first half of January.
The rise in the annual rate was the first uptick at the
start of a month since September, when inflation in Latin
America's No. 2 economy hit a 2-1/2-year high.
But cooling price gains since then and risks to growth
prompted the central bank to hint in January that it could cut
rates from the current 4.5 percent if inflation keeps easing.
Policymakers have said they expected inflation to rise in
early 2013 due to low inflation rates early last year, but to
end the year close to 3 percent - the central bank's target.
Speaking at an event in Mexico City after the data was
released, Mexican central bank chief Agustin Carstens noted that
inflation has been steadily heading toward 3 percent during the
last decade, while growth is now slowing.
"If that environment is consolidated, and given that
inflation expectations are favorable, a reduction in the
benchmark interest rate could be in line with the convergence of
inflation towards its permanent goal of 3 percent," he said,
according to a presentation posted on the bank's website.
Friday's data first pushed investors to trim bets that the
Banco de Mexico could cut rates in the coming months, but
Carstens' comments drove yields on interest rate swaps lower.
Early February's inflation was "slightly above what we
expected that doesn't change our thinking about the
central bank," said Mario Copca, an analyst at CI Banco in
Mexico City, who says there is still margin for a rate cut.
"We are not seeing that this could generate sustained
The market is eyeing slightly more than even odds for a
25-basis-point cut in March, while a cut of that magnitude is
fully priced in for April and investors are tilting toward bets
of at least 50 basis points in cuts this year.
PHONE PRICE PRESSURE
Mexico's inflation trend contrasts with Brazil's where
annual inflation ticked up to 6.18 percent in early February and
analysts are expecting higher rates.
Consumer prices rose 0.24 percent in the first
half of February, above the 0.15 percent notched in the first
half of January and the 0.17 percent rise analysts had forecast.
Core prices, which strip out volatile goods
like energy and food, also rose 0.24 percent, above the 0.18
percent in the first half of January and compared to an expected
The acceleration was driven by increases in mobile phone
tariffs, which fell sharply at the end of last year, and a
rebound in fresh food prices, up 0.94 percent in the half-month
on rises in the cost of green tomatoes and onions.
Annual inflation in services, a key gauge of home-grown
price pressures, accelerated to 2.16 percent but non-food core
goods inflation, the most sensitive to currency fluctuations,
Separate data showed Mexico's jobless rate rose in January
to its highest since September 2011, raising concerns of a dip
in consumer spending, which fuels economic growth.
The seasonally adjusted unemployment rate rose
to 5.27 percent last month, the national statistics agency said,
above expectations for a 4.9 percent rate and an upwardly
revised 5.02 percent rate in December.
Unemployment has fallen back from rates near 6 percent seen
during a deep recession in 2009, but had crept up in recent
months as the global slowdown weighed.
The headline unadjusted jobless rate was 5.42
percent in January, above an expected 4.97 percent and the 4.47
percent in December.