* Banxico rate decision due 0900 local time/ 1400 GMT
* Reuters poll sees pause after cut to 4 pct in March
* Recent data back case for further easing, but later
MEXICO CITY, April 26 Mexico's central bank is
expected to keep interest rates unchanged on Friday after a
surprise cut last month, but analysts are looking for signs
policymakers are prepared to give another jolt to the economy
given recent weak performance.
All 21 analysts polled by Reuters forecast the Banco de
Mexico will keep rates at a record low 4 percent this month
after it cut them for the first time in nearly four years in
Markets are pricing in a good chance of another 25 basis
point cut in the second half of the year, when inflation is
forecast to decline and a expected pick-up in the United States
should boost growth prospects in Mexico.
But policymakers will have to take into account a spike in
consumer prices that has taken inflation above the central
bank's ceiling in March and early April.
"We think the post-meeting communique will strive to find a
delicate balance: signaling a readiness to tighten in response
to high inflation, but heavily discounting this option and
showing readiness to provide support for growth if necessary,"
BNP Paribas economist Nader Nazmi said.
"The statement may come across as neutral-to-dovish."
Chief among the central bank's concerns is the rising peso
, up almost 6 percent so far this year on the back of
strong capital inflows, fanning worries about softening growth.
Mexico has absorbed $160 billion in new foreign investment
in its financial markets in the last three years, pushing stocks
and bonds to record highs. Analysts say stimulus by the
Bank of Japan could spur fresh inflows.
The stronger currency does help keep a lid on inflation by
capping the price of imported goods. Inflation accelerated to a
seven-month high of 4.72 percent in early April, although
governor Agustin Carstens has said it should dip below 4 percent
around mid-year and be close to 3 percent by year-end.
Banco de Mexico targets inflation of 3 percent, with a one
percentage point tolerance zone either side.
Mexico's strong currency contrasts with recent weak economic
data suggesting economic growth slowed in the first quarter of
2013, after picking up at the end of 2012.
Retail sales fell in February by the most in 3-1/2 years and
industrial output growth slowed. The trend continued in March,
with the jobless rate rising and consumer confidence and factory
activity deteriorating for the third month running.
Still, some said the central bank would take care not to
hint too strongly at cuts in the statement accompanying the rate
decision, given the spike in inflation and policymakers' warning
in March that the cut was not the start of a cycle.
"It will be difficult for the central bank to validate rate
cut expectations until headline inflation retreats back inside
the target band," Jefferies Latin America strategist Siobhan