Mexico's inflation higher than expected in early July

© Reuters. FILE PHOTO: Customers walk past vegetables on a makeshift stall in a market in Mexico City, Mexico April 8, 2022. REUTERS/Luis Cortes

By Brendan O'Boyle

MEXICO CITY (Reuters) - Mexican consumer prices rose higher than expected in early July, official data showed on Friday, boosting expectations of further interest rate hikes as the central bank struggles to tame stubbornly high inflation.

In the first half of July, inflation accelerated 0.43% over the second half of June, statistics agency INEGI said, against a forecast of 0.39% in a Reuters poll of economists. Inflation in the year through early July reached 8.16%, against an expected rise of 8.10%.

Core inflation, which strips out some volatile food and energy prices, reached 7.56% in the year through early July.

The numbers bolstered expectations that Mexico's central bank would raise its benchmark interest rate at its next meeting, currently scheduled for Aug. 11.

Banxico, as the central bank is known, has increased the benchmark rate by 375 basis points since mid-2021 as it struggles to bring inflation to its target of 3% plus or minus one percentage point.

President Andres Manuel Lopez Obrador told a news conference he expected inflation to be prolonged, but said it would be worse without a government subsidy on gas as well as a plan to increase domestic food production.

"The inflation in Mexico is less than in the United States and in Europe because of what we have done and we're going to continue to do," Lopez Obrador said.

U.S. consumer prices jumped 9.1% year-on-year in June, up from May's 8.6% rise.

Agricultural products generally and fruits and vegetables saw the biggest price rises, jumping 1.22% and 1.87%, respectively, from the second half of June.

The rise for agricultural products was the fastest first half-month jump for the category this year, according to the INEGI data.

Core inflation for the category of food, drinks and tobacco, was 0.48%, the smallest first half-month rise for this category since December.