Mexico inflation rises in early Oct to 1-1/2 year high

Mexico's annual inflation rate rose in early October to its highest in 1 1/2 years, breaking past the central bank's target and supporting bets that policymakers could raise interest rates again after a deep slump in the peso.

Inflation in the 12 months through mid-October rose to 3.09 percent, the national statistics institute said on Monday, its highest half-month reading since the second half of April 2015.

A Reuters poll projected the rate would rise to 3.08 percent from 2.88 percent in early September.

Mexico's central bank targets inflation of 3 percent.

Despite relatively tame inflation and weak growth, steep peso losses pushed policymakers hike interest rates three times this year, most recently in late September, in a bid to keep currency weakness from hitting inflation expectations.

A Reuters poll last week showed Mexico's central bank is expected to increase its benchmark interest rate by another 25 basis points before the end of the year to 5 percent, tracking an anticipated hike by the U.S. Federal Reserve.

The annual reading of the core price index, which strips out some volatile food and energy prices, rose to 3.10 percent in early October, its highest since December 2014.

The core index reflects higher goods costs as the weak peso drives up import prices.

On a monthly basis, Mexican consumer prices rose 0.49 percent during the first half of October on higher electricity costs as summer subsidies were cut.

The core price index climbed 0.17 percent.