Mexican central banker warns of headline inflation 'contagion effect'
Updates with details from interview, background in paragraphs 6-10
MEXICO CITY, Aug 14 (Reuters) - Bank of Mexico Deputy Governor JonathanHeath said on Wednesday a recent rise in headline inflation could hit other prices, adding thathe viewed the central bank's recent interest ratecut as premature.
Heath, in an interview with local outlet El Universal, said he thought "it is premature to lower (the rate) now. When I see visible results, then we can lower it."
The Bank of Mexico, also known as Banxico, cut its key interest rate by a quarter of a percentage point to10.75% last week, with Heath and Deputy Governor Irene Espinosa voting to hold the rate.
Consumer price data for July showed annual headline inflation rose to 5.57%, surpassing June's rate of 4.98%, as a result of a significant increase in the non-core component.
Banxico Governor Victoria Rodriguez told Reuters on Sunday she believed the jump to be fleeting.
But Heath said the rise could have a "contagion effect" on other prices, which happened in 2017 with gas prices.
The balance of risks for inflation remains biased toward the upside, he added.
Heath also said the U.S. Federal Reserve's monetary policy decision in September would not have an effect on his vote. The Fed is expected to cut interest rates at its Sept. 17-18 meeting.
"That's not going to weigh on my decision," he said. "I'm going to be looking at inflation, headline inflation, services inflation, and what (inflation) estimates look like for the end of this year and next."
The central bank's inflation target is 3%, plus or minus one percentage point. It expects to reach that target by the fourth quarter of 2025.
Reporting by Kylie Madry; Editing by Sarah Morland and Paul Simao
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