UPDATE 3-Holding rate, Mexico cenbank eyes inflation risk from weak peso
(Adds comment from central bank governor Carstens)
By Michael O'Boyle and Alexandra Alper
MEXICO CITY Dec 5 (Reuters) - Mexico's central bank on Friday held borrowing costs steady but said a slump in the peso could add to inflation pressures, and noted that growing social unrest in Latin America's No. 2 economy may crimp growth.
The central bank left its main interest rate at a record low of 3.00 percent, as expected by 19 of 20 analysts polled by Reuters last week. IDL:nL6N0TI4BK]
Mexico's peso slumped to a fresh 2-1/2 year low against the dollar on Friday. The Mexican currency has been hammered as global oil prices have dropped, driving prices for Mexico's crude MXN-OSP to a five-year low.
Policymakers said that in recent years bouts of weakness in the peso had little impact on consumer prices, but they noted that "the sustained depreciation of the national currency could represent an upside risk to inflation."
The peso exchange rate needed to be monitored "with a lot of caution," central bank governor Agustin Carstens said on the sidelines of an event in Santiago, Chile.
However, countering risks from the currency, policymakers said slack in the local economy and slow inflation around the globe would help contain price pressures.
Mexico's annual inflation rate eased in early November to 4.16 percent but it is still above the central bank's 4 percent tolerance ceiling. Policymakers said the rate should fall to around 3 percent by the middle of next year. Continuación...