MEXICO CITY Mexican inflation likely slowed in August for the seventh straight month, with the closely watched core index expected to return to 2021 levels, a Reuters poll showed on Tuesday.

Inflation levels, however, are expected to remain above the Bank of Mexico's target range, boosting bets that the central bank will continue to hold its key interest rate at the current level to tame rising prices.

The median forecast of 10 analysts surveyed was for annual headline inflation to ease to 4.61% in August, which would be the lowest rate since February 2021.

Headline inflation surged to a record 8.7% last year.

Meanwhile, annual core inflation is forecast to have slowed to 6.12%, which would mark its lowest level since December 2021.

The closely watched core price index is considered a better gauge of price trends because it strips out some volatile food and energy prices.

The Bank of Mexico, which has a target range for inflation of 3% plus or minus one percentage point, last month voted to keep its benchmark interest rate steady at a historic high of 11.25%, with board members suggesting it will stay at that level for an extended period of time to bring inflation to target.

"The discussion of whether we are going to reduce the interest rate is not on the table yet," Bank of Mexico Governor Victoria Rodriguez said during a presentation last month.

In August alone, consumer prices likely rose 0.52% compared to July, while core inflation is forecast to have risen 0.30%, according to the poll.

Mexico's national statistics agency INEGI will publish consumer price index data for August on Thursday.

(Reporting by Noe Torres; Additional reporting by Gabriel Burin in Buenos Aires; Editing by Paul Simao)