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UPDATE 1-Mexico inflation accelerates to highest level in over 3 years

·1 min read

(Updates with details)

MEXICO CITY, May 7 (Reuters) - Mexican annual inflation picked up faster than expected in April to its highest level in more than three years, moving well above the central bank's target level, official data showed on Friday.

Inflation jumped to 6.08% in April from 4.67% in March, national statistics agency INEGI said. A Reuters poll of economists had forecast a reading of 6.01%.

Inflation now stands at its highest rate since December 2017. The central bank targets inflation of 3%, with a one percentage tolerance range above and below that.

The Bank of Mexico (Banxico), which had progressively cut interest rates during much of the coronavirus pandemic, kept its benchmark lending rate unchanged at 4% at its last policy meeting, citing rising inflation expectations.

Capital Economics said April's acceleration in inflation was mainly driven by base effects linked to fuel prices, and that the impact should unwind over the coming months.

"We think that Banxico will look through this above-target inflation reading and keep its policy rate at 4.00% at its meeting next week," it said in a note to clients.

The core inflation rate, which strips out some volatile items, inched up to 4.13% from 4.12% in March.

Compared to the previous month, prices increased by 0.33% in April. A rise of 0.25% had been forecast in the poll. (Writing by Dave Graham Editing by Chizu Nomiyama)