MEXICO CITY, Oct 31 (Reuters) - Mexico's central bank is expected to hold its benchmark interest rate steady later on Friday and argue that a recent spike in inflation will fade next year.
Fifteen analysts surveyed by Reuters expect the central bank to hold its main interest rate at 3.00 percent while a recent dip in the economy pushed one analyst to predict a 25 basis point cut.
The central bank will issue its policy statement at 9:00 local time.
Mexican inflation hit a nine-month high of 4.32 percent in early October, above the bank's 4 percent ceiling, but policymakers expect inflation to fall toward their 3 percent target next year.
Most analysts forecast that policymakers will want to leave borrowing costs at a record low to support the economy, which has been weaker than expected.
"Inflation is going to improve, so that means there's no point in hiking and while the economy is getting better, growth is not going to be spectacular next year," said Alexis Milo, an economist at Deutsche Bank in Mexico City.
Central bank chief Agustin Carstens said last Sunday that a slower pace of government-controlled gasoline price increases expected next year and the fading effects of tax hikes from this year would help inflation cool near 3 percent by mid-2015.
Some economists are skeptical of the bank's forecast, citing talk of a minimum wage hike that could cause a chain reaction of higher consumer prices.
Policymakers held their benchmark rate steady at July and September meetings after catching markets off guard with a 50 basis points cut in June to aid a sluggish economy.
Recent data showed the service sector contracted in August while exports and consumer imports sank in September.
The weakness pushed Barclays economist Marco Oviedo to expect another interest rate cut. But other economists doubted the central bank would risk undermining the peso, which slumped to a 2-1/2 year low this month.
Lower interest rates could sap demand for Mexican assets among yield-hungry global investors and a weaker peso could further fan inflation by driving up import prices.
Carstens also pointed to signs of more solid economic growth last Sunday, saying he expected Latin America's No. 2 economy to grow between 2.5 percent and 2.7 percent this year, above the midpoint of the central bank's forecast range.
Mexico's central bank is not expected to raise interest rates until the U.S. Federal Reserve lifts borrowing costs, which is expected in the second half of next year. (Reporting by Michael O'Boyle; Editing by Richard Chang)