(Bloomberg) -- Mexico’s annual inflation accelerated slightly more than expected during the first two weeks of May, likely fueling bets that the hawkish central bank will be slow to lower its interest rate.

Consumer prices rose 4.78% from a year prior, the national statistics institute reported on Thursday, a tad above the median forecast of 4.75% in a Bloomberg survey and also up from the 4.67% increase in the prior two-week period. 

Core inflation, which excludes volatile items like food and fuel, slowed to 4.31%, matching the median forecast in the survey while also easing from 4.34% during the last two weeks of April. 

Banxico, as the central bank is known, held its key interest rate at 11% in an unanimous decision on May 9 to counter rising price pressures, after cutting it for the first time since 2021 on March 21. The bank also marked up its headline and core inflation forecasts for the next six quarters, meaning policymakers now see inflation reaching the official 3% target at the end of 2025.

The upward revision of the price forecasts doesn’t mean that the disinflationary process has stopped, Banxico Governor Victoria Rodriguez Ceja said in a radio interview after the last decision. “Headline and core inflation are currently at levels visibly lower than what we saw in 2022 and early 2023,” she said. 

Taking a less sanguine view, Deputy Governor Irene Espinosa said cutting interest rates in March was premature and delayed inflation converging to the target by two quarters. Deputy Governor Galia Borja expressed concern about service prices, saying they haven’t yet shown a downward trajectory and remain one of the main risk factors for lowering consumer price growth to the goal.

In their May 9 post-decision statement, Banxico’s boardmembers said they expect that services inflation will be more stubborn than anticipated and reiterated that core readings remain an upward risk for prices. 

The persistence of high inflation in Latin America’s second-biggest economy is related to a strong domestic consumption thanks to remittances from Mexicans living abroad and also cash transfer programs implemented by President Andres Manuel Lopez Obrador, especially in the run-up to the June 2 presidential election.

The most recent Citi survey of local economists published Tuesday showed increased inflation estimates for the end of 2024, rising to 4.21% from 4.17%, and for the end of 2025, to 3.71% from 3.70%. 

--With assistance from Rafael Gayol and Giovanna Serafim.

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