By Aida Pelaez-Fernandez
MEXICO CITY, July 23 (Reuters) - Mexico's annual inflation rate decelerated for an eighth consecutive fortnight in early July, official data showed on Thursday, slowing more than market participants had expected while core inflation returned to the central bank's target range.
In Latin America's second-largest economy, 12-month inflation hit 3.10% in the period, down from 3.55% a month earlier, national statistics agency INEGI said.
Annual inflation hit its lowest level since
late 2020 and undershot economists in a Reuters poll that forecast a reading of 3.12%.
Itau's analysts said that goods prices have benefited from the peso's strength, but warned that "the moderation in other services inflation appears to be driven by temporary factors rather than signaling a sustained improvement in underlying price pressure.
Moreover, "weather-related shocks associated with El Niño could pose upside risks in the final months of the year," Itau added in a note.
The closely watched core price index, which strips out some volatile food and energy prices, rose 3.95% in the 12 months through early July, down from 4.12% in the first half of June, in line with expectations.
Annual core inflation is now within the Bank of Mexico's target range of 3%, plus or minus one percentage point.
Banxico held its benchmark interest rate at 6.5% last month in a unanimous decision, as governors have warned about persistent inflationary risks, despite the recent downward trend over the past few months .
Month-on-month consumer prices rose 0.7% during the first half of June, below the 0.10% increase expected by economists in the poll, while the core price index landed at 0.16%, in line expectations.
(Reporting by Aida Pelaez-Fernandez and Ricardo Figueroa; Additional Reporting by Noe Torres; Editing by Gabriel Araujo and Chizu Nomiyama )
