UPDATE 1-Mexico annual inflation rate slows for third month, raises rate-cut bets

(Adds background on inflation)

MEXICO CITY, Aug 8 (Reuters) - Mexican consumer prices rose 3.78% in the year through July, the national statistics agency said on Thursday, with the pace of increases slowing for a third straight month and raising the odds of interest rate cuts.

The inflation figure was down from 3.95% in June and in line with estimates of analysts surveyed by Reuters, who predicted inflation of 3.79%.

The rate of price increases was the lowest recorded since the 3.36% registered in December 2016.

The central bank has maintained its benchmark interest rate at 8.25%. As the growth of the Mexican economy slows, some analysts expect the bank to cut interest rates during its meeting next week, following the steps of the U.S. Federal Reserve.

“The further fall in Mexican inflation in July... keeps an interest rate cut at next week’s policy meeting on the table,” Edward Glossup, Latin America economist with Capital Economics, wrote in a note to investors. “Domestic conditions warrant lower rates; inflation and growth remain weak.”

Lower inflation in transport, housing and food fueled the decline in July, Glossup wrote.

Mexico’s central bank targets inflation of 3%.

Consumer prices rose 0.38 percent during the month, according to non-seasonally adjusted figures.

The core index, which strips out some volatile food and energy prices, rose 0.26 percent during the month. (Reporting by Noe Torres; writing by Julia Love; Editing by Bernadette Baum)