UPDATE 2-Mexico inflation hits fresh low in early Dec after rate hike

(Adds economic activity, paragraphs 5-6)
    MEXICO CITY, Dec 23 (Reuters) - Mexico's annual inflation
cooled to a fresh record low in early December, showing little
impact from a sharply weaker peso currency after the central
bank hiked rates for the first time in seven years. 
    Inflation in the 12 months through mid-December 
slowed to 2.00 percent, the national statistics institute said
on Wednesday, well below the 2.21 percent reached in the full
month of November, its seventh consecutive record low.
    A poll of analysts by Reuters forecast a rate of 2.05
    Mexico's central bank has said it expects annual inflation
to end the year around 2 percent, before climbing back to around
the bank's 3 percent target next year. But lackluster growth is
containing price pressures in Latin America's No. 2 economy.
    Economic activity expanded by 0.2 percent in
October compared with the prior month, its weakest showing since
July, the national statistics institute said in a separate
report on Wednesday. It noted industrial output and agriculture
    Compared with October 2014, the economy grew by
2.3 percent in the same month this year. 
    Last week, Mexico's central bank hiked borrowing costs last
week off an all-time low in a bid to stem further weakening in
the peso after the Federal Reserve lifted U.S. interest rates
the day before. 
    Mexico's peso, which had tumbled to a series of
unprecedented lows this year on concerns of higher U.S.
borrowing costs, has continued slipping since the rate hikes
last week. 
    But the latest data underscored the so-far limited impact of
peso weakness. While the depreciation of the currency has made
imported goods more expensive, it has been offset by price
drops, such as a big decrease in telecommunications costs.
    The data showed that consumer prices rose by 0.26 percent in
the first half of December, helped by falling
tomato and air transportation prices. The analysts' poll had
forecast a 0.28 percent increase.
    The core price index, which strips out some
volatile food and energy prices rose by 0.27, above expectations
for a 0.23 increase. That took the 12-month core inflation rate
 to 2.39 percent, in line with expectations for a
2.39 percent rise.

 (Reporting by Alexandra Alper Editing by W Simon)