June 18 (Bloomberg) -- Mexico's government reached an accord with industry groups to freeze the price of tortillas, coffee, beans and more than 150 other items through the end of 2008 after inflation accelerated to the fastest in three years.

The agreement with the Confederation of Industrial Chambers, an umbrella group of industry organizations, also covers wheat flour, ketchup and juices, said Ismael Plascencia Nunez, the president of the confederation. Prices for cooking oils will remain unchanged through August, the government said.

``There has been a significant rise in food prices worldwide,'' Mexican President Felipe Calderon told reporters today at the presidential palace in Mexico City. ``The government has been working and will continue working hard to prevent this from affecting the pockets of Mexicans.''

Mexico's peso, which had reached a five-year high earlier in the day, trimmed gains after the announcement as traders bet it signaled the government was using the price accord, instead of higher central bank rates, to fight inflation. Mexico's central bank has kept its benchmark interest rate unchanged at 7.5 percent for seven straight months as it balances rising consumer prices with slowing economic growth.

Food-processing companies have asked the government for support in return for their participation in the accord, said Armando Cobos Perez, general director of the National Chamber of the Preserved Foods Industry, without giving more details. The freeze in prices isn't conditioned on compensation for the loss in revenue, he said.

Sacrificing Margins

``They are sacrificing their margins to contribute to supporting families,'' Cobos Perez said in a telephone interview. ``We did this voluntarily.''

Mexico's National Retailers Association has no comment on today's accord, press chief Angelica Medel Moreno said.

While the agreement will hold down prices for now, it isn't a long-term solution, said Juan Trevino, chief economist for HSBC Holdings Plc in Mexico City.

``When the cost of inflation starts to hit the margins of the businesses involved, they'll want to renegotiate,'' Trevino said.

Wheat, corn and rice have risen to records this year because of shrinking global stockpiles and more demand. World food imports will cost a record $1.04 trillion this year, $215 billion more than in 2007, according to the United Nations' Food and Agriculture Organization. Soaring food prices have spurred riots from Haiti to Egypt in the past several months.

Mexican consumer prices rose 4.95 percent in May from a year earlier, the most since December 2004, driven by food, housing and air transportation costs. Faster inflation led a minority of analysts to predict the central bank will raise its benchmark interest rate by a quarter point this week.

Rate Outlook

``If the inflation problem in Mexico is significant enough to require voluntary price caps, then I imagine it's significant enough to prompt the central bank to hike interest rates,'' said Gray Newman, chief Latin America economist at Morgan Stanley in New York, who forecasts a rate increase.

Seventeen of 20 economists surveyed by Bloomberg expect the central bank will keep the rate unchanged this week.

Calderon has also tried to fight higher prices for food by lifting import tariffs on corn, wheat, rice and beans in May. He also eliminated import taxes on nitrogen-based fertilizer, and cut in half the tax on imported powdered milk.

Mexico's biggest retailers, including Wal-Mart de Mexico SAB, agreed to lower prices during the first quarter under a government effort to help families burdened by a new gasoline tax and rising food prices.

Importing Grains

The cost of importing grains soared 75 percent to $1.2 billion in the first three months of 2008 compared with a year earlier, according to the National Statistics Agency. Mexico is one of the largest importers of coarse grain in the world, according to the UN's Food and Agriculture Organization.

Local rice producers agreed last month to sell the product at 10 percent less than the price of imported grain.

The peso rose 0.1 percent to 10.3038 per dollar at 1:57 p.m. New York time, from 10.3118 yesterday. It touched 10.2752 earlier in the day, its strongest since June 2003.

To contact the reporter on this story: Jens Erik Gould in Mexico City at jgould9@bloomberg.net

Last Updated: June 18, 2008 17:18 EDT