Mexico central bank seen holding interest rates at record low

MEXICO CITY, Sept 5 Fri Sep 5, 2014 1:01am EDT

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MEXICO CITY, Sept 5 (Reuters) - Mexico's central bank is expected to keep interest rates steady on Friday at a record low after signs of stronger economic growth fueled hopes of a quickening recovery for Latin America's No. 2 economy.

All 17 analysts surveyed by Reuters expect the central bank to hold its main interest rate at 3.00 percent on Friday. Policymakers kept rates on hold in July after delivering a surprise 50 basis point cut in June.

Growth wobbled early this year, as a harsh U.S. winter hammered American demand for Mexican factory exports and a tax hike dragged on consumer spending.

But data last month showed second-quarter growth beat expectations thanks to a pick up in industrial activity and domestic demand, bolstering bets that economic expansion could reach the finance ministry's 2.7 percent forecast for 2014.

Data on Monday showed Mexico's manufacturing sector sentiment hit a seven-month high on growth in output and employment.

On Friday, policymakers could highlight the cheery growth data, while still pointing to economic headwinds that will keep consumer price pressures contained.

Annual inflation stayed above the central bank's 4 percent tolerance ceiling in early August but eased slightly from late July.

Mexican Central Bank Governor Agustin Carstens said last month he saw "very good prospects" that inflation will near the bank's target rate of 3 percent at the beginning of 2015.

The median forecast of analysts surveyed by Reuters is for the central bank to raise its benchmark rate 50 basis points in the third quarter of 2015. A previous poll had forecast a 25 basis point hike in the second quarter of next year. (Reporting by Alexandra Alper; Editing by Diane Craft)

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