Mexico central bank expected to hold rates steady amid weak growth
MEXICO CITY, June 4 (Reuters) - Mexico's central bank is expected to hold borrowing costs at a record low later on Thursday following weak growth in the first quarter and tame inflation despite a deep slump in the peso.
All 15 analysts polled by Reuters last week expect the Banco de Mexico to hold its key rate at 3.00 percent. The central bank will issue its policy statement at 1:00 p.m. local time (1800 GMT).
Data last month showed Mexico's annual inflation rate cooled in early May to more than a nine-year low of 2.93 percent, easing some concerns that a slump in the peso could fan price pressures.
Mexico's peso is drifting back toward a record low it hit in March. The currency weakness is driving up import prices but there has been little sign of wider prices pressures. Meanwhile, the cheap peso is helping boost exporter profits.
Alonso Cervera, an economist at Credit Suisse in Mexico City, said the bank would stick to a balanced tone seen in its last statement that would feed expectations that policymakers will hold rates steady until the U.S. Federal Reserve moves.
"Growth has been moderate and weaker than expected," Cervera said. "The currency is at similar levels to the last decision, so I do not expect them to put more emphasis on the peso."
The central bank said last month inflation will be slightly below its 3 percent target during the second half of the year and it cut its growth forecast, saying that a sluggish economy will help contain price pressures.
Latin America's No. 2 economy grew at its slowest pace in over a year in the first quarter, undermined by flagging oil revenue and weak U.S. growth.
Last year, economists expected Mexico could grow nearly 4 percent this year on bets an opening of its energy sector would boost growth. But a sharp drop in oil prices since last year has damped hopes for a tide of investment.
Analysts now see the economy growing less than 2.7 percent this year, according to a central bank poll this week.
Policymakers have held borrowing costs steady since the middle of last year at a record low to help boost economic growth, but the central bank is expected to follow in the footsteps of the U.S. Federal Reserve when it hikes interest rates. (Reporting by Michael O'Boyle; Editing by Bernadette Baum)
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