Mexico inflation cools to fresh record low in November

Mexico's annual inflation cooled more than expected to a fresh record low in November, but policymakers are still expected to raise interest rates next week in a bid to support the battered peso.

Inflation in the 12 months through November cooled to 2.21 percent, the national statistics agency said on Wednesday, below the 2.48 percent rate in October and the 2.29 percent forecast in a Reuters poll.

Mexico has been posting record lows in its annual inflation rate since May, marking the longest period ever where the pace of consumer price gains has stayed below the central bank's 3 percent target.

The 12-month core inflation rate dipped to 2.34 percent from 2.47 percent in October, just below estimates, pointing to little widespread pressure on consumer prices despite a slump in the peso this year to record lows.

Tame inflation and weak growth would seem to give policymakers room to leave their benchmark interest rate steady at 3 percent.

However, Mexico's central bank is still expected to hike when U.S. borrowing costs move higher in a bid to prevent bondholders from dumping local bonds as U.S. yields move higher and worsening the peso's losses.

Twenty of 22 economists in a poll by Banamex on Monday expect the Bank of Mexico to raise its rate by 25 basis points on Dec. 17, the day after U.S. Federal Reserve's own rate announcement.

Central Bank Governor Agustin Carstens on Monday told Reuters that the central bank was closely watching the drop in inflation, but that the central bank also had to be ready to "take care" of the peso.

Data on Wednesday showed consumer prices rose 0.55 percent in November, below the poll's expectations for an advance of 0.61 percent.

The core index, which strips out some volatile food and energy prices, rose 0.04 percent during the month, below the poll's expectations for an advance of 0.08 percent, helped by a drop in mobile phone rates.