Mexico headline inflation unexpectedly slows in December but core prices rise

MEXICO CITY, Jan 7 (Reuters) - Mexican inflation unexpectedly eased slightly in December, official data showed on Friday, but a key yardstick of underlying price pressures reached a 20-year-high, prompting a member of the central bank to voice concern.

Still, inflation remained far above the target level, reinforcing bets the central bank will raise its benchmark interest rate next month for the sixth consecutive time.

Figures from national statistics agency INEGI showed inflation in Latin America's No. 2 economy running at 7.36% last month, compared with 7.37% in November. The consensus forecast in a Reuters poll of analysts had been for a reading of 7.51%.

However, the core rate of inflation, which strips out some volatile items, grew to 5.94% from 5.67%, reaching its highest level since October 2001.

Mexican central bank board member Jonathan Heath noted rising core inflation was worrisome despite the easing in prices overall.

"It is not good news since the core continues to rise," Heath said on Twitter, noting the problem was persistent and possibly even "structural" in nature.

He added that the increase in food prices, which ended the year up 8.11%, was especially concerning.

The Bank of Mexico (Banxico) raised its benchmark interest rate more than expected last month to 5.50% as it sought to contain rising price pressures.

Banxico's next monetary policy meeting is scheduled for Feb. 10. The bank targets inflation of 3%, with a one percentage point tolerance range above and below that.

Month-on-month, Mexican consumer prices increased by 0.36% in December, the INEGI data showed. Meanwhile, the core index of prices rose by 0.80% from November.

Reporting by Daina Beth Solomon and Miguel Angel Gutierrez; Editing by Chizu Nomiyama and Hugh Lawson

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