* Central bank sees inflation easing toward 3 pct target
* Upgrades 2012 growth outlook to 3.25 pct to 4.25 pct
* Cenbank chief Carstens says peso not sole rate cut trigger (Adds analyst quotes, forecast details.)
By Michael O‘Boyle and Krista Hughes
MEXICO CITY, May 16 (Reuters) - Mexico’s central bank lifted its growth forecast for this year, and policymakers said the peso would rebound from a slump, even as it warned a recovery in the currency would not automatically trigger an interest rate cut.
In its quarterly inflation report, the Banco de Mexico said it saw economic growth this year in a range of 3.25 percent to 4.25 percent, up from the 3 percent to 4 percent seen three months earlier.
Mexico has kept its key interest rate on hold at 4.5 percent since mid-2009 as it attempted to maintain a balance between a recovering economy, a weak currency and an uncertain global environment.
In its last policy statement, the central bank put an improvement in global markets - seen as code for a stronger peso - as the first in a checklist of preconditions for a rate cut, but Mexico’s central bank chief, Agustin Carstens, cautioned it was not the only one.
“Without a doubt, external conditions have been one of the factors which, on different occasions, have prevented lower borrowing costs, but I would not dare to say that this was the only trigger for that decision,” he told reporters at a news conference to present the report.
Markets have written off the chance of a change to rates any time soon, in contrast to the region’s biggest economy, Brazil, which is seen easing policy further. .
“After having said that the appreciation in the exchange rate did have consequences for inflation, now they are trying to play down this comment to give themselves room to cut rates at some point, but the market is not buying it,” said Federico Flores at financial group Invex in Mexico City.
Deepening concerns about Europe have contributed to a 9-percent slide in the peso since mid-March, reviving the risks to Mexican inflation from higher import prices.
A weaker peso helps growth in export-oriented Mexico, and Carstens said he expected its effect on inflation to remain moderate.
Carstens said the peso had been hurt by the debt crisis in Europe and that its value did not reflect Mexico’s economic fundamentals.
“The possibility of a catastrophic event in Europe has done much to increase risk aversion,” he said. “When the volatility subsides, it will likely mean a reversal for the peso.”
Detailed forecasts show the output gap, a measure of slack in the economy, closing toward the end of the year, but Carstens said he did not see inflation pressures.
The central bank stuck with forecasts for inflation to come in between 3 percent and 4 percent for 2012 and 2013 but said it would approach the central bank’s target of 3 percent next year after a probable spike back toward 4 percent in mid-2013.
For 2013, its economic growth forecast of 3 percent to 4 percent remained unchanged.
The government has an official forecast for growth in 2012 of 3.5 percent, but officials are optimistic growth this year may match last year’s 3.9-percent growth rate on the back of a pick-up in the United States, its main trading partner.
First-quarter growth figures due on Thursday are expected to show the economy expanded 1.34 percent in the first quarter, from a meager 0.4 percent at the end of last year, and up 4.5 percent compared to the same period in 2011. (Reporting by Mexico City Newsroom, additional reporting by Jean Luis Arce; Editing by James Dalgleish, Theodore d‘Afflisio and Padraic Cassidy)