UPDATE 2-Mexico central bank holds key rate, eyes weak peso
(Adds comment from central bank governor, details on growth)
MEXICO CITY, Sept 21 (Reuters) - Mexico's central bank held borrowing costs steady on Monday, flagging tame inflation, but signaled it is prepared to raise rates if a slump in the peso hits consumer prices.
The Banco de Mexico left its key rate at a record low of 3.00 percent, as expected by 19 of 21 analysts surveyed by Reuters last week.
Mexico's central bank said it was ready to act when necessary to ensure its 3 percent inflation target, a warning it introduced in July to suggest it could even hike before the U.S. Federal Reserve.
So far, policymakers noted there was no sign the weak peso was causing widespread pressure on consumer prices, which backs expectations Mexico will hold rates until the Fed lifts borrowing costs.
Mexico's Central Bank Gov. Agustin Carstens told local radio on Monday that a sluggish economy and tame inflation justified keeping interest rates steady, but policymakers were prepared to hike if the peso market became "erratic."
Last Thursday, the U.S. Federal Reserve kept interest rates unchanged but left open the possibility of a modest policy tightening later this year.
The peso has hit successive lows this year on concerns that higher U.S. rates will sap demand for riskier emerging market assets. However, foreign holdings of Mexican peso bonds have held around record highs while inflation has fallen to an all-time low.
The central bank's statement was largely similar to July's statement, but specified that policymakers were watching the "pass through from the exchange rate" rather than the "behavior of the exchange rate" mentioned in July. Continuación...