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Mexican Inflation Continues Downward Trend in June

MEXICO CITY, July 7 (Reuters) - Mexico's annual inflation rate decelerated in June for a fifth consecutive month to 5.06%, data from statistics agency INEGI showed on Friday, continuing a downward trend spurred by a long cycle of rate hikes.

Headline inflation came in slightly above a market forecast of 5.02%, but is now at its lowest since March 2021.

Consumer prices fell 0.10% in June from May, according to non-seasonally adjusted figures, against an expected drop of 0.09%.

The closely watched core price index, which strips out some volatile food and energy prices, rose 0.30% during the month.

Annual core inflation, considered a better gauge of price trends because it excludes some highly volatile items, was 6.89% in June, while the forecast was for 6.87%.

"Headline inflation should continue to ease over the coming months, but it's likely to be a slow grind lower from here," Capital Economics' emerging markets economist Kimberley Sperrfechter said.

Pantheon Macroeconomics' Chief Latin America Economist Andres Abadia said "inflation continues to fall rapidly, thanks to the lagged effect of tighter financial conditions, lower raw material prices and the impressive performance of the MXN (Mexican peso) rebound in recent months".

The Bank of Mexico's governing board said its benchmark interest rate is likely to remain on hold at 11.25% for an "extended period", minutes from the bank's last monetary policy meeting showed, as inflation remains "complex".

Mexico's central bank, also known as Banxico, unanimously held its benchmark interest rate steady at the meeting for a second time, after a nearly two-year rate-hike cycle in which it raised the rate by 725 basis points to combat inflation.

Banxico has been repeating the message that rates will need to remain on hold in order to bring inflation down to its 3% target, which most of the bank's five board members forecast will happen in the fourth quarter of 2024.

Reporting by Natalia Siniawski, Editing by Louise Heavens and Devika Syamnath

Source: Reuters

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