MEXICO CITY - Mexican annual inflation reached its highest level in nearly 22 years in July, official data showed on Tuesday, rising faster than expected and fueling expectations that the central bank will raise the country's benchmark interest later this week.
Inflation rose to 8.15% in the year through July from 7.99% in June, national statistics agency INEGI said. A Reuters poll of analysts had forecast 8.13% inflation.
Consumer price inflation now stands at its highest since December 2000 when it was 8.96%, far above the central bank's target of 3%, plus or minus a percentage point.
Compared to the previous month, prices rose 0.74% in July.
July's inflation numbers reinforce expectations that the Bank of Mexico will raise its key interest rate at its monetary meeting on Thursday.
Jason Tuvey, senior emerging markets economist at Capital Economics, said the latest figures mean that Banxico, as the central bank is known, is almost certain to hike interest rates by 75 basis points to 8.5% at its next meeting.
"Inflation is set to remain above the target range for some time and, as a result, we expect rates to be taken up to 10% by year-end," he said in a note to clients.
A Reuters poll also showed analysts foreseeing the benchmark rate reaching 8.5% at Banxico's next meeting.
The central bank has increased the key interest rate by a total of 375 basis points over the course of its last nine monetary policy meetings.
Mexico's closely watched core inflation index, which strips out some volatile food and energy prices, rose 0.62% during July. Annual core inflation increased 7.65%.
(Reporting by Brendan O'Boyle and Gabriel Araujo; Editing by Bernadette Baum and Mark Porter)