Mexico inflation cools in September to eight-month low

Reuters

* Mexico annual inflation cools for fifth month

* Avocado prices pull down rate, despite storms

* Data gives more room for rate cut

By Alexandra Alper

MEXICO CITY, Oct 9 (Reuters) - Mexican inflation eased in

September for the fifth month in a row, despite flooding that

spoiled crops and drove up fresh food prices, boosting bets for

another widely expected interest rate cut.

Inflation in the 12 months through September

slowed to 3.39 percent from August's 3.46 percent rate, the

national statistics agency said on Wednesday, marking its

slowest pace since January.

The figure was below expectations for a 3.48 percent rise,

according to a Reuters poll.

Avocado prices pulled down the headline rate, while tomato

and gasoline prices rose, after twin storms last month killed at

least 130 people and flooded large areas of farmland.

The damage prompted the government to revise down its growth

forecast for the year to 1.7 percent.

Mexico's central bank is expected to cut its benchmark rate

from a record low of 3.75 percent by another 25 basis points in

October to help counter a slowdown in Latin America's No. 2

economy. It holds its next meeting on Oct.25.

The bank, which targets an inflation rate of 3 percent, plus

or minus one percentage point, unexpectedly lowered borrowing

costs last month after growth contracted in the second quarter

for the first time in four years.

The International Monetary Fund slashed its 2013 growth

outlook for Mexico on Tuesday to 1.2 percent after a

weaker-than-expected first part of the year.

Yields on short-term interest rate swaps edged down after

the data, as investors boosted bets for another cut.

Consumer prices rose 0.38 percent, below

expectations for a 0.46 percent rise, and up from a 0.28 percent

rise in August.

Core prices, which strip out volatile energy

and food prices, rose 0.32 percent, just below forecasts for a

0.35 percent increase and well above August's 0.09 percent rate.

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