Mexico inflation exceeds target in February, rate cuts in question

* Inflation surpasses Banxico's target, raising bets for a pause in rate cuts

* Consumer prices rose 4.02% in February, exceeding expectations

* Analysts warn against rate cuts amid rising inflation and oil prices

By Aida Pelaez-Fernandez

MEXICO CITY, March 9 (Reuters) - Mexico's annual inflation accelerated more than expected in February to surpass the central bank's target range, official data showed on Monday, with analysts expecting the inflationary pressure to delay further interest rate cuts.

Consumer prices in Latin America's second-largest economy rose 4.02% in the year through February, according to national statistics agency INEGI, above the 3.94% increase expected by economists in a Reuters poll, and up from 3.79% the previous month.

Mexico's central bank, also known as Banxico, has an inflation target of 3%, plus or minus a percentage point, and keeps a close eye on inflationary pressures.

While most board members remained open to further rate cuts after the decision to hold the benchmark rate at 7% in February, according to the central bank minutes, price pressures and current global uncertainty have raised market expectations of a delay in rate cuts.

"It would be a serious monetary policy mistake to cut interest rates in Mexico," said Gabriela Siller, Banco Base's economic analysis director. "Inflation is already back above 4% and there are many risks that it will continue to rise," she added.

Capital Economics analysts said that the rising inflation combined with the current surge in oil prices, "pretty much rule out the chance of a 25 basis point cut at Banxico's next meeting".

Oil prices hit their highest level since 2022 on Monday as the U.S.-Israeli war on Iran continued, stalling much of the global supply of oil and liquefied natural gas.

The closely watched core index, which strips out some volatile food and energy prices, landed at 4.5%, in line with expectations and compared with a 4.52% rate registered the prior month.

In February alone, consumer prices rose 0.50%, exceeding expectations of a 0.43% rise, while the core index rose 0.46%, slightly below market forecasts.

(Reporting by Aida Pelaez-Fernandez and Ricardo Figueroa; Editing by Aidan Lewis and Andrei Khalip)