(Recasts with outlook for monetary policy, adds market reaction)
By Michael O'Boyle and Alexandra Alper
MEXICO CITY, Sept 19 (Reuters) - Mexico's central bankers think that a recent spike in inflation will fade by early next year even as the economy picks up speed, minutes showed on Friday, suggesting that interest rates will remain steady into next year.
Central Bank board members voted 5-0 at their Sept. 5 meeting to hold their benchmark rate at a record low of 3 percent.
The majority of policymakers thought that a recent rise in inflation above the central bank's 4 percent ceiling would "quickly" cool, slowing to around the bank's 3 percent target in the first half of next year.
Most policymakers also thought that the outlook for the economy was improving, as exports picked up after a weak start to the year, but the majority thought that slack in the economy would contain price pressures in the near future.
Yields on Mexican interest rate swaps were little changed after the minutes as investors stuck to bets of a 25 basis point rate hike by April next year.
The prevailing view among economists is the central bank will wait to raise borrowing costs until the U.S. Federal Reserve starts tightening monetary policy, according to Reuters surveys.
The Fed is expected to start raising interest rates in the second quarter of next year, according to a Reuters poll last week.
The majority of the bank's board remarked it was becoming more complicated to determine Fed policy, saying the U.S. central bank was sending mixed signals, according to the minutes.
Mexico's peso has shed about 2.5 percent against the dollar from a high in early July amid concerns about the pace of Fed tightening.
Mexico's economic growth wobbled early this year, as a harsh U.S. winter hammered American demand for Mexican factory exports and a tax hike dragged on consumer spending. But the economy picked up speed in the second quarter and is seen expanding about 2.5 percent this year.
Mexico's annual inflation rate in August climbed faster than expected to 4.15 percent, driven by higher fresh meat prices.
Board member Manuel Sanchez said last week that it may be hard to reach 3 percent due to a possible minimum wage hike and potential market volatility. Mexican lawmakers are looking at proposals to raise the minimum wage.
All members of the board said they were worried that a minimum wage hike could hurt employment levels and fan inflation higher if any increase is not matched by stronger productivity. (Editing by W Simon)