MEXICO: Core Inflation Expected to Edge Down in H1 Sep, Ahead of Banxico Meeting

* Tomorrow's economic activity and bi-weekly CPI data are unlikely to have a major direct impact on Banxico's interest rate decision later in the day, where a third consecutive rate hold at 6.50% is widely expected. (See the MNI preview here: ) However, latest pressure on MXN in the aftermath of the Fed rate hike increases the risk of a slight hawkish tilt. * Economic activity is expected to have ticked up on the month in July, equating to a slight moderation in the annual rate of growth from 2.8% y/y to 2.5%. Overall, growth remains subdued, with downside risks still prevalent, which should help to contain core inflation ahead. * In H1 September, core CPI inflation is projected to inch down to 3.80% y/y, from 3.83%, keeping it just below Banxico's 4% target range ceiling. Nonetheless core services inflation is likely to remain above 4%, warranting a continuation of the central bank's cautious stance for now. Headline CPI inflation is forecast to tick up to 3.35% y/y on the back of higher food prices. * JP Morgan estimates that most of the pressure on headline will come from agricultural prices. Beyond that, the underlying details appear considerably more benign, in their view. The