MEXICO CITY Aug 7 Mexico's central bank expects the annual inflation rate to fall to around 3 percent in early 2015 and believes higher fresh food prices are causing only a temporary jump in consumer prices, Banco de Mexico Governor Agustin Carstens said on Thursday.
The annual inflation rate in July climbed above the central bank's 4 percent target ceiling to a five-month high, the national statistics agency said earlier on Thursday.
"The board expects we will rapidly converge to 3 percent at the start of the coming year," Carstens said, speaking at an event on Thursday.
Inflation will fall once the impact of new taxes implemented in January has been absorbed and after the Finance Ministry replaces a recent string of gasoline price hikes with a budget law that will tie prices to expected inflation, he added.
The Mexican central bank held its benchmark interest rate steady in July after a surprise cut in June to a record low of 3.0 percent.
Mexico targets a 3 percent inflation rate, plus or minus 1 percentage point. The central bank is expected to hold borrowing costs steady until around the middle of next year, when the U.S. Federal Reserve is seen raising its main rate. (Reporting by Adriana Barrera; Writing by Elinor Comlay; Editing by Leslie Adler)