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UPDATE 2-Mexico central bank holds rates, eyes pickup in growth

(Adds economist quote, graphic)

MEXICO CITY, July 11 (Reuters) - Mexico's central bank kept interest rates on hold on Friday, highlighting signs of stronger economic growth while still pointing to slack in the economy that bodes for steady borrowing costs ahead.

The Banco de Mexico maintained its benchmark interest rate at a record low of 3 percent, as expected by analysts polled by Reuters, after policymakers surprised markets by delivering a 50 basis point cut last month.

Board members said growth picked up in the second quarter after a soft patch but warned domestic spending "still hasn't shown clear signals of recovery." They pointed to economic headwinds that will keep consumer price pressures contained until late 2015.

Still, policymakers said they would monitor the factors affecting inflation "including the expected economic recovery and the relative monetary posture of Mexico compared to the United States," suggesting they would not cut interest rates further.

The U.S. Federal Reserve is expected to raise its benchmark interest rate in the middle of next year. The median forecast of analysts surveyed by Reuters last week is for Mexico to move in sync, raising its benchmark rate 25 basis points in the second quarter of 2015, on par with a prior poll.

Credit Suisse economist Alonso Cervera expects the central bank to begin raising rates in the second half of next year.

"When the Fed hikes and if we get turmoil in the markets, I think the central bank will be quick to react," he said.

Mexico's economy grew only 0.3 percent in the first quarter compared with the last three months of 2013, weaker than expected, and the central bank has said it will likely revise down its current forecast for an expansion this year of 2.3 percent to 3.3 percent.

Data last month showed the economy expanded in April at its fastest pace since November 2012 on strength in the services sector.

But sales at big retail stores open at least a year dipped in June, highlighting Mexicans' continued reluctance to spend.

Mexico's annual inflation rate ticked up in June to a three-month high of 3.75 percent, but remained below the central bank's 4 percent ceiling.

Policymakers said the inflation trend continued to be favorable and the annual rate should fall back toward near 3 percent by the start of next year.

(Reporting by Alexandra Alper and Michael O'Boyle; Editing by Tom Brown and Meredith Mazzilli)