UPDATE 2-Mexico central bank cuts growth outlook on weak local demand

miércoles 13 de agosto de 2014 16:40 GYT

(Recasts with focus on monetary policy, adds central bank and analyst comments)

MEXICO CITY Aug 13 (Reuters) - Mexico's central bank trimmed its 2014 growth forecast on Wednesday, blaming a sluggish economy that bodes for steady borrowing costs well into next year.

The central bank cut its outlook for growth in 2014 to between 2.0 percent and 2.8 percent from a previous estimate of 2.3 percent and 3.3 percent, the bank said in its quarterly inflation report. The bank already had cut its outlook in May.

Mexico's economy is on track to post weaker than expected growth for the second year in a row. So far in 2014, a harsh winter dragged on growth in the United States, Mexico's top trading partner, while Mexican tax hikes hit domestic demand.

The central bank said internal demand had been weaker than expected during the second quarter, though it expects growth to pick up in the second half of the year.

"The big challenge ahead is for domestic spending to consolidate and grow at a greater pace," Central Bank Governor Agustin Carstens said at an event in Mexico City.

The central bank held its main interest rate steady in July following a cut to a record low of 3.0 percent in June after the economy grew less than expected in the first quarter.

The latest data has shown further weakness. Mexican industrial production unexpectedly shrank in June, in its first contraction since December, while consumer confidence fell to a five-month low in July.

The central bank said in its report that the economy likely grew 0.9 percent in the second quarter compared to the first quarter, when it posted a 0.3 percent quarter-on-quarter expansion.   Continuación...