* Annual inflation 3.55 pct, vs Reuters poll 3.58 pct
* Uptick in inflation breaks four-month downward streak
MEXICO CITY, March 7 Mexico's inflation
accelerated in February to break a four-month easing streak, but
the central bank is still expected to cut interest rates at some
point as it argues consumer prices are in an overall downtrend.
Consumer prices rose 3.55 percent in the year
through February, the national statistics agency said on
Thursday, faster than January's 3.25 percent increase but just
below expectations for a rise of 3.58 percent in a Reuters poll.
Policymakers have argued since January that inflation is in
a clear downward trend and that the economy can handle lower
borrowing costs without the risk of stoking higher prices,
prompting speculation the Banco de Mexico might cut rates from
the current 4.5 percent as soon as Friday.
Markets are pricing in a 45 percent chance of a rate cut of
25 basis points, or one-quarter percentage point, unchanged from
before the latest data. Most analysts expect the Banco de Mexico
to delay any rate cut until the second quarter.
"People will not change their rate expectations based on
today's numbers," said BNP Paribas economist Nader Nazmi, who
expects rates to remain steady on Friday.
Inflation in Mexico, Latin America's No. 2 economy, had been
trending down since a 2-1/2-year high reached in September.
However, the central bank has said it expected price gains
to accelerate around the end of the first quarter and the start
of the second, before moving down again.
Consumer prices rose 0.49 percent in February,
up from 0.40 percent in January but below the 0.52 percent
expected in a Reuters poll.
The core price index, which strips out some
volatile food and energy prices, rose 0.51 percent in February,
compared with an expected 0.52 percent increase and a 0.42
percent rise in January.
The data showed core services inflation, which had fallen
sharply in late 2012 on the back of mobile phone tariff
discounting, accelerated as cell phone costs rose 28 percent in
That took annual services inflation, a key gauge of
home-grown price pressures, up to 2.21 percent, the highest
since last October.
Still, non-food core goods inflation, the most sensitive to
currency fluctuations, eased to 3.27 percent. Fresh food prices,
which have been very volatile of late, were broadly stable.