By Aida Pelaez-Fernandez
MEXICO CITY, June 9 (Reuters) - Mexico's annual inflation rate decelerated for a second month in a row in May, official data showed on Tuesday, returning to the higher end of the central bank's target range while concerns about future trends and core prices remain present.
Consumer prices in Latin America's second-largest economy rose 3.94% in the year through May, easing from a 4.45% increase the prior month and landing lower than economists' 4.03% increase forecasts in a Reuters
poll.
"Inflation is moving in the right direction, but progress remains uneven and core services inflation is still running above levels consistent with the target," Pantheon Macroeconomics' Chief Latin America Economist Andres Abadia said in a note.
Mexico's central bank, also known as Banxico, has an inflation target range of 3%, plus or minus a percentage point, and expects the rate to hit its aimed 3% in the second quarter of 2027.
The institution last month ended its monetary easing cycle amid inflation concerns linked to the impacts of the U.S. and Israel war on Iran and a sluggish economy.
The bank said it was ending its over two-year-long easing circle as it lowered its benchmark interest rate by 25 basis points to 6.50% last month, in a divided decision that showed diverging opinions about inflation trends.
While the fall in Mexican inflation was larger than expected, "the policy rate is likely to remain at 6.50% in the foreseeable future," Capital Economics analyst Kimberley Sperrfechter said in a note.
In May alone, consumer prices registered their first fall in two years, down 0.21% from the month before, according to non-seasonally adjusted figures, a bigger-than-expected decline compared with economists' expectations of a 0.12% decline.
The closely watched core index, which strips out some volatile food and energy prices, rose 0.22% during the month, and on annual terms it slowed to 4.19%, down from 4.26% in April.
(Reporting by Aida Pelaez-Fernandez and Carlos Serrano; Editing by Alex Richardson and Nick Zieminski)
