Inflation in Mexico Below 10% : Economy: The single-digit milestone is seen as a victory for the efforts of President Carlos Salinas de Gortari.

MEXICO CITY — Mexico’s annual inflation rate dipped below 10% in June for the first time in more than two decades, a triumph for the administration of President Carlos Salinas de Gortari, which five years ago took over an economy with an annual inflation rate of 159%.

Since his 1988 inauguration, single-digit inflation has been Salinas’ main economic goal. The 9.8% rate, to be officially announced today by the Bank of Mexico, reflects some drastic measures that the Salinas administration implemented. These measures kept prices under control but also contributed to an economic slowdown.

Achieving the goal of single-digit inflation now frees the government to take more aggressive steps to help revive the flagging economy, administration officials said Wednesday.

“It will give us more room to maneuver, while making sure we do nothing that would run the risk of reviving inflation,” said an official who asked not to be identified.

As an example of actions that the government is taking, the official cited lower interest rates, evidenced by the 0.29% drop in interest rates on benchmark 28-day Treasury certificates. Treasury bills fell to 14.3% at Wednesday’s weekly auction, compared to 16% as recently as May.

The government had kept interest rates high to fight inflation.

The official also hinted at the possibility of slightly more government spending, particularly by state-owned enterprises, such as the oil and electric power corporations, which are important customers for businesses nationwide.

Still, he cautioned that growth will continue to be modest this year, in part because of economic problems in the United States, which buys nearly three-fourths of Mexico’s exports.

The government will be able to revive the economy with a minimum of spending because so much of industry is operating below capacity, said Mexico City economist Mario Dehesa.

“That makes it easy to grow without inflation,” he said. However, he added that he does not expect a reversal of the austere economic policies that brought inflation down to a single digit. “Inflation is still the top priority,” he said. “If prices rise again, our exporters will not be able to compete” in the international market.

Lean government budgets were among the weapons in the war on inflation that ultimately hurt many sectors of the economy, particularly small businesses and manufacturing industries.

The slowdown in government spending, for example, has been cited by analysts as the reason for the losses suffered by such oil industry suppliers as Tubos de Acero de Mexico, which was recently threatened with a proxy fight from its American investors concerned about the company’s plans for a financial restructuring.

Until recently, a flood of foreign investment had fueled growth in other industries, partially offsetting the slowdown brought on by the fight against inflation.

However, as passage of the North American Free Trade Agreement has seemed doubtful, foreigners have become less enthusiastic. Foreign investment in companies and the stock exchange fell to $761.7 million in May, continuing a three-month decline from the record $1 billion in March.

The economy slowed to 2.4% growth during the first quarter and shrank 0.1% in April, the most recent month for which figures are available.

The government official noted that a one-month drop is not a recession, which is defined as two quarters of economic contraction.