The prices of food and non-alcoholic beverages, which have the largest weight of 39% in the consumer basket, grew 2.3% on the year in March, from a 2.2% increase in February, the statistical office said in a statement.
Last month's CPI decline was entirely due to a 5% drop in gasoline prices.
In the 12 month through March, the CPI increased 2.4 percent.
Mexico's central bank has a target of 3% inflation.
Meanwhile, cell phone service - which had been blamed for the bafflingly low inflation previous year - finally showed the uptick analysts had predicted.
Average prices for regular gasoline known as magna increased nationally by 11.4% last month compared to March 2017 while premium gas rose 8.4% and diesel jumped by just over 10%, according to the Energy Regulatory Commission (CRE). The core consumer price index, which strips out volatile food and energy prices, rose 2.0 per cent in March, slowing from 2.5 per cent in February. Fed Chairman Jerome Powell said last week that 12-month inflation readings "should move up notably this spring" because of the fading of weakness from a year earlier.
In line with the central bank's assessments, annual inflation is expected to hover around 2.2% in 2018 and converge to the central bank's target in 2019.
"This suggests to us that the Fed's preferred core PCE price inflation rate will be running at 2.0 percent by the June report, if not sooner", said John Ryding, chief economist at RDQ Economics in NY.
Market reaction:The Dow Jones Industrial Average and S&P 500 index were both set to open sharply lower amid worries about a USA military strike in Syria and heightened tensions with Russian Federation.
But the CPI remains an important benchmark and the March price data could send jitters through Wall Street, where investors get skittish when faced with signs the Fed could raise interest rates more aggressively. Prices of cereals and bakery products rose 0.4 percent.
The core CPI was lifted by rising rents and healthcare costs.
Economists were looking for an annual increase of 3.2%, down from 3.7% in February.
The price hikes translate into an increase of 1.76 pesos (just under United States $ 0.10) per liter for motorists buying magna, 1.49 pesos per liter for premium and 1.7 pesos per liter for diesel. There were also declines in the cost of telecommunication, used cars and trucks, tobacco and education.
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