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MEXICO CITY, March 21 Mexico's central bank kept
interest rates on hold on Friday, pointing to slack in the
economy while noting that a recent spike in inflation had eased
and was unlikely to spur wider price pressures.
The Banco de Mexico maintained its benchmark interest rate
at a record low of 3.50 percent, as expected by
analysts polled by Reuters last week.
Policymakers said there was less chance of sustained price
pressures after inflation cooled in February but they noted that
the outlook for growth had yet to improve significantly.
"The board will remain alert to all factors that could
affect inflation and its expectations for the medium and long
term, especially the evolution of the degree of slack in the
economy," the central bank said.
Mexican growth sank to a four-year low of 1.1 percent last
year as consumer spending and industry disappointed, clouding
hopes for a strong recovery in Latin America's No. 2 economy
Wobbly U.S. demand for Mexican factory exports and weak
consumption have cast doubts on the government's forecast of 3.9
percent growth in 2014, despite a raft of reforms approved last
year to juice the economy over the long term.
"Economic conditions still aren't anchored enough to allow
the central bank to raise rates," Esteban Velazquez, an analyst
at Allianz Fondika.
Analysts polled by Reuters do not expect the central bank to
raise rates until early 2015.
Policymakers noted that the weak economy was unlikely to add
to consumer price pressures and that all signs continued to
point to the surge fading in the short term.
Inflation in February eased off an eight-month high the
month prior, which was fueled by new taxes on junk food and
Mexico's central bank targets inflation of 3 percent with a
1 percentage point tolerance band on either side.
Policymakers had cut rates in September and October to boost
growth, but January's price spike pushed inflation above the
central bank's 4 percent limit for acceptable price gains.
(Reporting by Alexandra Alper, Michael O'Boyle and Gabriela
Lopez; Editing by Dave Graham, Toni Reinhold)