Mexico annual inflation inches up in October

MEXICO CITY: Mexico's annual inflation rate rose less than expected in October, hovering near the central bank's long-term target and leaving policymakers room to cut interest rates.

Consumer prices rose 3.20 percent in the 12-month period through October, the national statistics agency said on Wednesday, lower than the 3.26 percent median forecast in a Reuters poll but higher than the 3.14 percent recorded in September.

Mexico's central bank has a 3 percent inflation target but says it can live with variations of up to one percentage point higher or lower.

The consumer price index rose 0.68 percent in October after climbing 0.25 percent in September, according to national statistics agency data. The median forecast in a Reuters poll was for a rise of 0.70 percent.

The core index, which strips out some volatile food and energy prices, rose 0.26 percent during the month after climbing 0.27 percent in September. The median forecast in a Reuters poll was for a 0.29 percent increase.

UNCERTAIN OUTLOOK

On Tuesday, one of the central bank's policymakers expressed concern that Mexico's economy could weaken because of lax domestic and foreign demand -- words that might signal tolerance for lower rates.

But in an interview last week, central bank chief Agustin Carstens said that the future of Mexico's monetary policy hinges on how Europe handled its credit crisis.

The central bank has kept its benchmark interest rate at 4.5 percent since July 2009.

Copyright Reuters, 2011