(Bloomberg) -- Mexico’s headline inflation sped up less than expected last month, bolstering economists’ bets that the central bank could deliver another interest cut as soon as May.

Official data show consumer prices increased 4.42% in March from a year before, below the median estimate of 4.5% from analysts surveyed by Bloomberg. Monthly inflation hit 0.29%

So-called core inflation, which strips out volatile items like food and fuel, slowed to 4.55% compared to a year prior, below economists’ forecast of 4.63%, the national statistics institute reported on Tuesday.

The central bank, known as Banxico, began reducing borrowing costs at its March 21 meeting but has expressed concern that Latin America’s second-biggest economy may still be putting too much pressure on consumer prices. After cutting the benchmark interest rate by a quarter-point to 11%, policymakers cautioned that future adjustments would be gradual.

Read more: Mexico’s Central Bank Strikes Wary Tone on Any Future Rate Cuts

“The report puts a May cut back on the table,” said Marco Oviedo, a strategist at XP Investimentos. The data helps the case for easing “along with the fact that the economy is weakening, and the peso is too strong.”

Services Inflation

Fruits and vegetables fell 3.39% on the month, including big drops in staple items like onions and tomatoes. Meanwhile, services climbed 0.69%, the statistics agency said.

What Bloomberg Economics Says

“Persistent high core services inflation and increasing upward pressure on energy prices rein in the relief from slower-than-expected March headline inflation in Mexico. And with less favorable base effects in coming months, there’s limited room for additional interest-rate cuts.”

— Felipe Hernandez, Latin America economist

— Click here to read the full report

Jessica Roldan, an economist at Casa de Bolsa Finamex, said the increase in service prices, which central bankers are closely watching, was largely a result of seasonal factors. 

Aggressive government spending ahead of the June presidential elections and a tight labor market have particularly complicated Banxico’s path for future future cuts. “Here we are not out of the woods yet,” Roldan said.

The central bank targets inflation at 3%, plus or minus one percentage point. 

Economists in a Citi survey published on April 5 expect policymakers to lower borrowing costs by a quarter-point at their June meeting after keeping rates on hold in May.

“After last week’s minutes we saw the likelihood of observing a unanimous pause in May increasing,” Roldan said. “This, although a first step, could be a step toward going back to discuss a split decision,” she said, regarding today’s inflation data.

--With assistance from Rafael Gayol.

(Updates with economist quote in seventh paragraph.)

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