MEXICO CITY, Oct 29 (Reuters) - Mexico's central bank is expected to keep interest rates on hold on Thursday with inflation at a record low and economic growth sluggish, but policymakers could hint they are prepared to raise borrowing costs once the U.S. Federal Reserve moves rates up.
All 20 analysts surveyed by Reuters last Thursday forecast that the Banco de Mexico would hold its key lending rate at a historic low of 3.00 percent.
On Wednesday, the U.S. Federal Reserve kept rates unchanged but dropped a strong hint that it could raise them at its next meeting in December.
Mexican central bank policymakers have suggested they could lift borrowing costs, once the Fed hikes, in order to support the country's peso currency, which has hit successive record lows this year on prospects that higher U.S. interest rates will sap demand for higher-yielding -- but risker -- emerging markets securities.
Last week's Reuters poll showed that analysts had retreated from earlier expectations that the Mexican central bank would lift rates in December, instead predicting a 25 basis point hike during the first three months of 2016.
But yields on short term Mexican interest rate swaps jumped since Wednesday as investors increased bets on a 25 basis point hike by the Fed in December.
Policymakers have expressed concerns that the peso's sharp fall against the dollar could fan upward price pressures, but annual inflation slowed to a new record low of 2.47 percent in the 12 months through mid-October.
Furthermore, the peso has recovered from a record low in late September while foreign holdings of Mexican peso bonds have held near record highs.
Meanwhile, economic growth has been muted by uneven factory output and economists have dialed back expectations for economic growth this year from estimates above 3 percent early this year to 2.22 percent, according to a poll from Banamex last week.
The central bank is due to issue its latest monetary policy statement at 1 p.m. local time (1900 GMT). (Reporting by Dave Graham and Michael O'Boyle Editing by W Simon)