(Adds central bank view on markets, analyst comment, background on peso)
By Alexandra Alper and Luis Rojas
MEXICO CITY, May 9 (Reuters) - A majority of Mexico's central bankers believe an economic recovery will continue in the coming months, though risks to growth remain, minutes of last month's board meeting released on Friday showed.
Central Bank board members voted 5-0 at their April 25 meeting to hold their benchmark rate at a record low of 3.50 percent to boost flagging growth, citing tame consumer price pressures.
"Most board members ... maintained that downside risks to growth prevail, though the balance of risks has improved marginally," the minutes said.
A majority of board members pointed to strengthening factory exports and an incipient improvement in domestic demand, while all noted an uptick in government spending.
The minutes added: "A majority of board members thought the Mexican economic recovery will continue in the coming months."
Mexico's central bank cut interest rates three times last year to spur economic growth which sagged to a four-year-low of 1.1 percent. Analysts cut their estimates for growth this year to 3.01 percent, a central bank poll showed this week.
A majority of members saw a positive shift for Mexican financial markets, but also said the U.S. Federal Reserve's rollback of monetary stimulus could drive further market volatility, the minutes said.
"It is very clear that they are worried about that and it serves as a restriction for lowering the (benchmark interest) ... rate," said Benito Berber, an analyst at Nomura Securities.
Berber forecasts a rate hiking cycle starting in early 2016 if the Fed's exit from its current bond-buying program has not hammered the peso.
The bank is seen holding borrowing costs steady through early next year as the economy recovers from a weak start to 2014, according to Banamex poll of analysts released on May 6.
Expectations of the interest rate futures markets are similar.
Data last week showed Mexico's manufacturing sector sentiment picked up slightly in April off a five-month low, but remained weak.
Most policymakers said that risks to inflation remained unchanged, citing no demand-side pressures thanks to persistent slack in the economy and the labor market.
Data on Thursday showed 12-month Mexican inflation cooled to a six-month low of 3.5 percent in April as electricity subsidies kicked in and some fresh food prices eased.
Inflation rose above the central bank's 4 percent ceiling in January on the heels of a fiscal reform that boosted prices of sugary beverages and junk food, but it has since cooled.
Mexico's peso slumped early this year on fears about less U.S. monetary stimulus and a global sell-off in emerging markets.
But the currency reached an over four-month high on Thursday as U.S. Federal Reserve Chair Janet Yellen signaled the Fed would continue to support the U.S. economy with stimulus. (Additional reporting by Christine Murray and Dave Graham; Editing by Simon Gardner and W Simon)