Mexico’s central bank held borrowing costs steady

Mexico’s central bank held borrowing costs steady on Thursday, pointing to still sluggish economic growth and noting that inflation pressures remained muted following a deep slump in the peso.

The Banco de Mexico left its key rate at 3.00 percent, as expected by all 15 analysts surveyed by Reuters last week.

Policymakers said slack in the economy would help contain price pressures. That backs analysts’ expectations that the bank is unlikely to raise interest rates before the U.S. Federal Reserve does so, unless the peso weakens much further.

Data last month showed Mexico’s annual inflation rate cooled in early May to more than a nine-year low of 2.93 percent. The central bank said in its statement that there was no sign that the weak peso was causing wider price pressures.

Mexico’s peso is drifting back toward a record low it hit in March. The currency weakness is driving up import prices but there has been little sign of wider prices pressures. Meanwhile, the cheap peso is helping boost exporter profits.

The central bank said inflation will be slightly below its 3 percent target for the rest of 2015.

Latin America’s No. 2 economy grew at its slowest pace in over a year in the first quarter, hit by flagging oil revenue and weak U.S. growth.

Analysts see the economy growing less than 2.7 percent this year, according to a central bank poll this week.

(Reporting By Alexandra Alper and Michael O’Boyle; Editing by David Gregorio)

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