MEXICO CITY: Mexican consumer price inflation stood at 3.15% in the year through December, the national statistics agency said on Thursday, in line with market expectations and the central bank's target range, opening up the door to further rate cuts.

The median forecast of nine analysts surveyed by Reuters had expected inflation to dip to 3.16% from 3.33% registered in November.

Inflation largely eased in the last month of 2020 as prices for food items decreased, data from the INEGI statistics agency showed.

Mexico's central bank last month held its benchmark interest rate unchanged at 4.25% for the second consecutive meeting and said inflation expectations for the medium and long term remain stable at levels above 3%.

The Bank of Mexico targets inflation of 3%, with a tolerance range of one percentage point above or below.

"With concerns about inflation likely to ease, and the economy currently hit by a renewed surge in COVID-19 infections, we think that more board members will opt for additional easing," said Nikhil Sanghani, Latin America economist at Capital Economics.

Sanghani expects the Bank of Mexico to enact one more interest rate cut of 25 basis points at its next meeting in February, taking the policy rate to 4.00% and finalizing the bank's easing cycle.

Consumer prices rose 0.38% in December, according to non-seasonally adjusted figures. The core index, which strips out some volatile food and energy prices, rose 0.55% during the month.