UPDATE 2-Mexico central bank flags risk of Fed move on peso, weak growth
(Adds central bank quote on repercussions of U.S. monetary policy, analyst quote)
By Alexandra Alper and Jean Luis Arce
MEXICO CITY, March 26 (Reuters) - Mexico's central bank held interest rates steady on Thursday at a record low as policymakers eyed greater risks to growth and flagged concerns that a U.S. Federal Reserve move could hit the sinking peso.
The bank left its main interest rate at 3.00 percent as expected by a Reuters poll, promising to closely watch the actions of the Fed, which is expected to raise rates for the first time since 2006 as soon as September.
United States "monetary policy action could have repercussions on the exchange rate, inflation expectations and, therefore, price dynamics in Mexico," the central bank said in uncharacteristically explicit terms.
Mexico's peso this month weakened to historic lows against the dollar, hammered by a slump in oil prices and fears that an imminent U.S. rate hike may spur capital flight from emerging markets.
Policymakers said they could not rule out further international volatility that could affect the peso, which Central Bank governor Agustin Carstens described as "undervalued" last week.
Banxico also flagged less dynamism in Mexico's export sector, thanks to slower growth in U.S. manufacturing. Mexico sends nearly 80 percent of its exports, which are mostly factory goods, to the United States.
Low oil production and weak consumption also hamper Mexican growth, the central bank said. Continuación...