MEXICO CITY, Aug 8 Reuters Mexico39;s central bank lowered its benchmark interest rate in a divided vote to 10.75, the monetary authority said on Thursday, cutting the key borrowing rate from 11.00 but also signaling that it expects prices to rise higher than previously expected.

Three members of the bank39;s board voted to lower the rate by 25 basis points, while two others sought to hold it steady, according to a statement announcing the decision.

In its statement, the bank noted it expects inflationary pressures in Latin America39;s No. 2 economy to allow for further discussion of rate adjustments going forward.

Banxico, as the central bank is known, upwardly revised its forecast for yearend headline inflation to 4.4, from 4.0 previously, while maintaining its expectation for core inflation at 3.9.

The expectation for higher inflation while lowering borrowing costs struck some analysts as incongruous.

It doesn39;t make sense that they expect higher inflation and cut the interest rate, said Banco Base director Gabriela Siller, adding that the decision could diminish the central bank39;s reputation.

The uptick in July39;s inflation rate, to its highest level in over a year, was seen further complicating the bank39;s rates decision, as it balances combating inflation with the need to boost economic growth.

Consumer price data for last month showed that annual headline inflation rose to 5.57, surpassing June39;s rate of 4.98.

Immediately after the rate cut was…