UPDATE 1-Mexico consumer prices rise less than expected in early March as rate decision looms

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(Adds more details on inflation, context)

MEXICO CITY, March 23 (Reuters) -

Mexican consumer prices rose less than expected in early March, the national statistics agency said on Thursday, backing bets the central bank could slow the pace of its monetary tightening later this month.

Annual headline inflation in the first half of March hit 7.12%, down from 7.48% in the second of half of February and below market expectations.

Mexican core inflation, which strips out volatile food and energy products and has in recent months been more stubborn than headline inflation, was 8.15% in annual terms.

Both figures still remain well above the central bank's target of 3%, plus or minus one percentage point.

A Reuters poll of analysts had projected headline inflation at 7.26% in the month's first half, with core inflation at 8.15%

The data comes a week before Bank of Mexico's March 30 monetary policy meeting, where members of the governing board will set the country's key interest rate.

Board members have said slowing inflation rates are good news and have signaled their openness to a smaller interest rate hike, following the bank's bigger-than-expected 50 basis-point rise in early February.

If Banxico, as the Bank of Mexico is known, enacts a quarter-of-a-percentage-point rate increase next week, that would follow in the footstep of the U.S. Federal Reserve's 25 basis point rate hike on Wednesday.

Banxico has raised its key interest rate by 700 basis points to 11.00% since its rate-hiking cycle started in June 2021 to combat inflation. (Reporting by Ricardo Figueroa; Writing by Brendan O'Boyle; Editing by Steven Grattan)