(Bloomberg) -- Mexico’s annual inflation slowed more than expected in early September, ahead of next week’s central bank meeting where policymakers are expected to keep rates unchanged.

Consumer prices rose 4.44% in the first two weeks of the month compared to the prior year, down from 4.6% in late August, the national statistics institute reported Friday. The result was just below the 4.48% median estimate of economists surveyed by Bloomberg.

Core inflation, which excludes volatile items such as fuel and food, eased to 5.78%, compared to the 5.96% seen in the prior two-week period. School costs generally contribute to inflation pressures at this time of year as students return from vacation, but price rises have decelerated consistently every two weeks since the end of April.

“Annual reductions in goods prices and other services prices continue to alleviate the outlook. Nevertheless, the pace of decrease has slowed down and recent increases in energy prices represent a threat that could reverse part of the gains,” said Jessica Roldan, chief economist at Casa de Bolsa Finamex. “We do not think these data change Banxico’s position ahead of next week’s meeting.”

Mexico’s central bank, known as Banxico, has vowed that it will not reconsider its record 11.25% key rate that’s now in place until it has a better sense of inflation’s behavior. Analysts in the latest Citibanamex survey published Sept. 20 expect the next rate move to be a 25 basis-point cut in February. The bank’s next decision is on Sept. 28. 

After its last meeting in August, the board said it was “necessary to maintain the reference rate at its current level for an extended period,” echoing statements it had made in months prior. Board members under the leadership of Governor Victoria Rodriguez have been hesitant to talk about exactly when an easing cycle could begin.

“When the bank first gave its forward guidance, there was some amount of subjectivity and specialists thought that there could be a cut this year,” said Janneth Quiroz Zamora, director of economic analysis at Grupo Financiero Monex. “But Banxico has hardened its stance even more, and that’s why we’ve seen a change in the expectations.”

The performance of the Mexican economy has also contributed to the bank’s desire to take a wait-and-see approach instead of cutting rates. Latin America’s second-biggest economy outpaced expectations this year as the US, its largest trade partner, has so far dodged falling into recession as many analysts had expected. 

Separately, Mexico’s IGAE indicator, a measurement of economic activity, rose 3.19% in July from a year earlier, down from 4.11% in the June reading and below analysts’ estimate of 3.6%. On a monthly basis, it was 0.15%, below the 0.26% median forecast, the country’s statistics institute also reported Friday. 

“Economic activity lost momentum at the margin, in July, but we believe that this is not the start of a protracted downtrend,” said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics. “Looking ahead, leading indicators point to a relatively decent second half of the year, but increasing real rates will continue to put a lid on the recovery.”

--With assistance from Rafael Gayol and Giovanna Serafim.

(Update with analyst comments starting in fourth paragraph, Banxico details in sixth.)

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