Annual headline inflation in the first half of the month reached 7.94%, beating both the 7.77% recorded in the month of December and economists' forecasts of 7.86%, though still below the two-decade high of 8.70% registered in August and September.

Meanwhile the core index, which strips out some volatile food and energy prices, hit 8.45% on an annual basis, back on the rise after showing some relief in December. It also exceeded forecasts of 8.34%.

That means annual inflation remains far above the Bank of Mexico's target rate of 3%, plus or minus one percentage point.

In an effort to tame rising prices, the central bank has increased its key lending rate by 650 basis points to 10.50% during the current hiking cycle, which began in June 2021.

Banxico, as the central bank is known, is considering another interest rate hike at its next monetary policy meeting on Feb. 9, according to the minutes of its last board meeting - a move markets already anticipate, including a potential higher-than-expected hike.

The latest headline inflation figure, Capital Economics' senior emerging markets economist Jason Tuvey said, "means that there is a growing risk that Banxico delivers a bit more tightening beyond the 25bp increase to 10.75% that we expect at February's meeting."

It is unlikely that the bank will make any cuts to the interest rate in the next six months, Bank of Mexico board member Jonathan Heath said in an interview last week.

In the first half of January, according to statistics agency INEGI, consumer prices rose 0.46% compared to the previous two-week period, while the core index rose 0.44%, both also exceeding market estimates.

"We still believe that deteriorating domestic fundamentals, lower raw material prices and improving global supply conditions will push inflation down over the coming months," Pantheon Macroeconomics' chief Latin America economist Andres Abadia said.

"But today's numbers suggest that Banxico will remain particularly hawkish in the near term."

Mexico's Latin American peer Brazil, where monetary tightening is on pause, also released mid-month inflation data on Tuesday, with prices slightly beating market forecasts.

(Reporting by Brendan O'Boyle and Gabriel Araujo; Editing by Steven Grattan)

By Brendan O'Boyle and Gabriel Araujo