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UPDATE 2-Dovish voices grow louder on Mexico's cautious central bank board

Anthony Esposito

(Adds comments from central bank minutes, economist)

MEXICO CITY, July 11 (Reuters) - The majority of the Mexican central bank's board members recommend maintaining a cautious monetary policy stance because of mixed inflation signals, minutes of its last meeting showed on Thursday, but two of the five members see signs lower rates could be justified.

Mexico's central bank has held the benchmark rate at 8.25% since December. It has not cut rates since June 2014.

"The central bank must maintain a prudent and cautious policy stance and monitor closely all determinants of inflation," the minutes said, emphasizing concern about stubbornly high core inflation.

Analysts increasingly see the Bank of Mexico (Banxico) inching towards a rate cut on the back of recent drops in headline inflation and soft economic growth. Although the board struck a cautious tone at the June 27 meeting, one member voted for a rate cut and another said that if inflation continues to soften cuts would be needed relatively soon.

Four Banxico board members voted to hold the overnight interbank rate unchanged at 8.25% at the meeting, while recent appointment Gerardo Esquivel voted for a 25-basis-point cut.

Esquivel, who is close to the government of President Andres Manuel Lopez Obrador, has long called for more diverse views among the autonomous Banco de Mexico's board members. In 2016 he raised the question of whether the bank should adopt a dual-mandate to promote growth as well as low inflation.

Another board member, who voted for a rate hold along with the majority, said "that if the behavior of inflation continues to be aligned with the convergence to its target, it will be necessary to begin a cycle of monetary policy easing in a relatively short horizon."

The board member underscored that the decision to begin a cycle of rate cuts must be taken "very prudently and cautiously."

Goldman Sachs' head of Latin American research Alberto Ramos said in a note to clients that the first rate cut was likely to take place at the bank board's September meeting, "but depending on the inflation-outlook friendless of incoming data and peso dynamics (does) not rule out an earlier cut at the August meeting."

All five board members agreed the slowdown in Mexico's economy had been greater than anticipated, with "signs of weakness" in the second quarter. (Reporting by Anthony Esposito, Additional reporting by Stefanie Eschenbacher; Editing by Frank Jack Daniel and Rosalba O'Brien)