March 24, 2015 / 2:35 PM / 4 years ago

UPDATE 1-Mexico early March inflation dips below central bank target

(Adds detail and background)

MEXICO CITY, March 24 (Reuters) - Mexican annual inflation inched below the central bank’s 3 percent target in early March, even as a weaker peso threatened to push up prices in Latin America’s second-biggest economy.

Inflation in the 12 months through mid-March eased to 2.97 percent, data from the national statistics office showed on Tuesday, below February’s 3.00 percent and the 3.03 percent expected in a Reuters poll.

The central bank has said it expects inflation to end the year below its target given slack domestic demand.

It is seen holding its benchmark interest rate at a record low of 3 percent on Thursday but is expected to hike rates around the time the Federal Reserve lifts U.S. borrowing costs.

Tumbling oil prices have hammered Mexico’s peso, which has weakened to all-time lows this month.

Central Bank Governor Agustin Carstens said last week the peso was undervalued and did not rule out intervention to support it.

Mexico is a top crude exporter to the United States and the government relies on revenues from state-run oil company Pemex to fund about a third of its budget.

Consumer prices rose 0.18 percent in the first half of March compared with expectations for a 0.21 percent rise.

Core prices, which strip out some volatile food and energy costs, climbed 0.15 percent, below expectations for a 0.20 percent rise. (Reporting by Alexandra Alper; Editing by James Dalgleish)

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