(Adds comments on growth)
MEXICO CITY, April 23 (Reuters) - Mexico’s central bank is weighing the weak economy’s need for low interest rates against the pressure to act if the Fed hikes, governor Agustin Carstens said on Thursday.
Carstens told lawmakers that policymakers will not hesitate to raise interest rates if inflation is threatened by weakness in the peso due to bets for higher U.S. interest rates.
He later suggested policymakers had room to hike off a current record low of 3 percent without crimping the economy.
“If we raise a little I think it won’t have a major impact on economic growth,” Carstens said at a congressional hearing in Mexico City.
Mexico’s central bank is expected to hold borrowing costs steady next week, according to a Reuters poll, and analysts project policymakers will raise rates by 25 basis points in the third quarter.
The peso last month sank to a historic low against the dollar, hammered by a slump in oil prices and fears that higher U.S. interest rates will push investors to drop emerging market assets.
But data on Thursday showed that annual inflation cooled closer to the central bank’s 3 percent target in early April, reaching 3.03 percent, giving policymakers room to keep rates low for now.
Mexican growth is expected to be just below 3 percent this year after expanding 2.1 percent last year amid slack domestic demand. (Reporting by Luis Rojas Editing by W Simon)