* Lower fresh food prices cool headline rate
* Backs central bank forecast price spike would cool
By Alexandra Alper
MEXICO CITY, July 9 Mexico's annual inflation
rate slowed more than expected to a four-month low in June,
backing central bank forecasts that a recent spike would soon
ease, but analysts held to expectations that policymakers would
not cut interest rates.
Inflation in the 12 months through June totaled
4.09 percent, the national statistics agency said on Tuesday,
below analysts' expectations for a 4.22 percent reading and down
from 4.63 percent in the twelve months through May.
Despite the dip, inflation has been above the central bank's
4 percent target ceiling for four consecutive months.
Yields on Mexican interest rate swaps fell after
the data was released as investors pared bets on a rate hike in
the next year. But analysts said it was unlikely the central
bank could move to lower borrowing costs anytime soon.
"I don't think they are going to be proactive in that sense
unless you have the manufacturing sector pulling down production
heavily," said Enrique Alvarez a strategist at IDEAglobal in New
York. "That's not in the cards right now."
A surprise interest rate cut in March to a historic low of 4
percent had spurred expectations of further cuts earlier this
year. However, the spike in inflation and a slump in the peso
currency pushed the market to abandon bets of lower benchmark
Mexico's peso has weakened around 8 percent since May
on concerns the U.S. Federal Reserve could soon begin to cut
back on its stimulus, casting aside policymakers' worries that
the peso was becoming too strong.
Policymakers are confident price pressures will ease further
in the second half, partly due to weaker growth in Mexico, Latin
America's second-biggest economy.
Disappointing growth in the first quarter prompted the
Finance Ministry to revise its growth forecast for the year down
to 3.1 percent from 3.5 percent. Growth in 2012 was 3.9 percent.
Consumer prices fell 0.06 percent in June as
some fresh food prices fell sharply after a recent surge, while
the core price index, which strips out some
volatile food and energy prices, rose 0.13 percent.
But Alvarez said the slower pace in price gains was not yet
a trend, adding that the central bank would want to "wait and
see" about uncertainty in the peso and the global economic
environment before moving on rates.