MEXICO CITY (Reuters) - Mexico's Central Bank Governor Alejandro Diaz de Leon said on Wednesday he expected the inflation rate to continue slowing in 2018 toward the bank's target rate of three percent.


Diaz de Leon was speaking on Mexican radio after data showed that headline inflation in Mexico slowed in the first half of January to 5.51 percent from a rate of 6.77 percent in December.


Asked whether he thought comments by U.S. Treasury Secretary Steven Mnuchin on Wednesday welcoming weakness in the U.S. dollar could spark a currency war, Diaz de Leon said that such remarks could generate some short term volatility.


"But I would say that we don't foresee there being an especially adverse and very confrontational environment on exchange rates, at least from what we've seen so far," he added.


(Reporting by Dave Graham)