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UPDATE 1-Mexico central bank hikes interest rate but hints cycle may be done

(Adds comments from central bank)

MEXICO CITY, June 22 (Reuters) - Mexico's central bank board made a divided decision to raise interest rates on Thursday and policymakers suggested that they may have raised borrowing costs enough to contain a spike in inflation.

The Banco de Mexico raised its benchmark rate by a quarter percentage point to 7.00 percent, as expected by all 17 analysts surveyed by Reuters last week. One member voted to hold rates, the bank said in a statement.

The central bank has now raised its main interest rate in the last seven meetings. It has reached the highest level since early 2009, with inflation at more than an eight-year high.

Policymakers said in their statement that with Thursday's hike "the reference rate has reached a level that is consistent with the process of efficient convergence of inflation to the 3 percent target."

"However, in the face of the risks that persist, the board will remain vigilant to assure that a prudent monetary stance is maintained," the board said.

The board said the majority of members voted to hike in order to anchor inflation expectations and also to take into account last week's move by the U.S. Federal Reserve to hike borrowing costs.

Analysts expected Mexico would match the Fed's quarter-point rate hike last week in a bid to maintain the appeal of peso-denominated debt to yield-hungry investors.

Mexico's peso extended gains to around 1 percent after the announcement.

Policymakers said in their statement the risks to growth were tilted downwards, but had improved on the margin. They said the risks to inflation were neutral given "the current stance of monetary policy."

Data earlier on Thursday showed that the annual inflation rate in early June rose more than expected to 6.30 percent, its highest since January 2009. But policymakers said in their statement that the inflation rate would peak in the coming months. (Reporting by Michael O'Boyle and Dave Graham; Editing by Lisa Shumaker)