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UPDATE 2-Mexico central bank keeps rate steady but may hike soon

* Central bank keeps benchmark rate at 4.5 percent, as expected

* Says could raise rate soon if inflation shocks persist

* Markets move to price in earlier rate hike

* Sees higher risks to both growth and inflation

MEXICO CITY, Oct 26 (Reuters) - Mexico's central bank said it could tighten monetary policy soon if inflation shocks persist, but left the benchmark interest rate unchanged on Friday, as expected.

The Banco de Mexico, which has not moved the rate from its current 4.5 percent level since mid-2009, said worries about growth and inflation had worsened although it expected that inflation had peaked at the 2-1/2 year high reached in September.

``Nonetheless, if inflation shocks persist, even if you assume that they are temporary, and a change in the trend of headline and core inflation is not confirmed, the board estimates that it could be appropriate to adjust rates upwards soon,'' policymakers said in a statement.

The blunt warning ratcheted up the level of concern about inflation compared to the last meeting, when the central bank said it would keep a close eye on prices to see if a rate increase was warranted, but gave no time frame.

The surprisingly tough stance pushed the peso into positive territory as markets moved to price in the chance of rates rising sooner than expected. Interest rate swaps suggested a 25 basis point rise as soon as July 2013, from early 2014 before the statement.

Still, economists said they did not think the central bank would act on its threat, even though the statement was the most hawkish since Agustin Carstens took the helm of the central bank in January 2010.

``I think they are trying to manage expectations without resorting to a rate increase,'' said 4Cast economist Pedro Tuesta. ``Carstens has played it well, but he's not going to hike.''

INFLATION EASING

Inflation has already started to ease from the 4.77 percent recorded in September and declined to 4.64 percent in the first half of October.

The Banco de Mexico, which targets inflation of 3 percent with a one percentage point tolerance band, said that the recent rise in the peso, prompted by the U.S. Federal Reserve's third round of bond-buying, should help cool Mexican inflation.

It expects inflation to keep easing in coming months and be ``very close to 4 percent'' towards the end of the year, drifting towards 3 percent in 2013.

Nomura economist Benito Berber said the central bank was betting that slow growth and weakness in the United States, Mexico's main trading partner, meant policymakers would not have to act on the rate hike threat.

He said Carstens is shorting inflation in a way - ``'if inflation goes up, I hike.' I bet you that all his models indicate that inflation will not go up. Because I have very simple models that say the same.''

Slower growth is also expected to keep a lid on price pressures.

``The balance of risks for growth in the Mexican economy has continued to deteriorate, reflecting the intensifying downside risks to the global economy and in particular for the U.S. economy,'' the central bank said.

Mexico's economy grew an average 4.3 percent in annual terms in the first half of the year, but the finance ministry is predicting a more moderate expansion of 3.5 percent to 4.0 percent for the whole of 2012.

Data released earlier this week showed the economy's annual rate cooling to 3.51 percent in August, although the jobless rate fell to a pre-recession low the following month.

The central bank said one of its main inflation worries was a recent pick-up in salaries, where growth accelerated to close to 5 percent annually in September, and said that a return of financial market turbulence could not be ruled out.