UPDATE 1-Mexico inflation higher than expected in early July

 (Recasts with annual rate, adds background)
    MEXICO CITY, July 24 (Reuters) - Mexican inflation was
higher than expected in early July, official data showed on
Tuesday, which could support bets that the central bank will
raise interest rates next week.
    Mexican inflation in the 12 months through early July
             accelerated to 4.85 percent, the national
statistics institute said.
    That surpassed a forecast for a 4.75 percent rate in a
Reuters poll of analysts, and compared with a rate of 4.65
percent throughout the whole of June.
    The central bank is expected by most economists to hold its
benchmark interest rate steady at 7.75 percent at its next
policy meeting on Aug. 2, according to a poll from Banamex last
week.
    However, bets in the interest rate swap market have tilted
toward the possibility of another hike            . 
    Mexican consumer prices rose 0.32 percent during the first
half of July, driven by higher gasoline costs, compared to
estimates of a 0.24 percent rate in the Reuters poll.
    The closely watched core price index             , which
strips out some volatile food and energy prices, climbed 0.19
percent in early July, compared to a forecast 0.15 percent.

 (Reporting by Michael O'Boyle; Editing by Bernadette Baum)