(Adds central bank comments, background)
MEXICO CITY Oct 29 Mexico's central bank held
borrowing costs steady on Thursday, saying the growth outlook
had worsened while inflation remained tame, but policymakers
hinted they are prepared to raise interest rates once the U.S.
Federal Reserve tightens credit.
The Banco de Mexico left its benchmark rate at
a record low of 3.00 percent, as expected by all 20 analysts
surveyed by Reuters last week.
On Wednesday, the U.S. Federal Reserve kept rates unchanged
but dropped a strong hint that it could raise them at its next
meeting in December.
Mexican central bank policymakers suggested in a statement
that once the Fed tightens credit they could follow suit, noting
they were watching the "relative monetary stance between Mexico
and the United States."
The country's peso currency has hit successive record
lows this year on prospects that higher U.S. interest rates will
sap demand for higher-yielding, but riskier, emerging markets
Yields on short-term Mexican interest rate swaps
have jumped since Wednesday as investors increased bets that
Mexico will hike its benchmark rate by 25 basis points in
The Mexican central bank said so far the peso's slump has
had an "ordered and gradual" impact on consumer prices,
suggesting it was unlikely to move before the Fed.
Earlier this year, the central bank suggested it could hike
rates before the Fed if the peso slump led to widespread
pressure on consumer prices. But the peso has rebounded from a
record low in late September while foreign holdings of Mexican
peso bonds have held near record highs.
Data last week showed annual inflation slowed to a new
record low of 2.47 percent in the 12 months through mid-October,
and the central bank said inflation would rise next year but
remain close to 3 percent.
Policymakers said the economic outlook has worsened as
growth in exports has flagged.
Economists have dialed back economic growth forecasts this
year to 2.22 percent from above 3 percent early this year,
according to a poll from Banamex last week.
(Reporting by Simon Gardner and Michael O'Boyle; Editing by