MEXICO CITY (Reuters) - After a string of interest rate hikes, Mexico's central bank is expected to hold borrowing costs steady on Thursday on signs that a spike in consumer prices is close to peaking and following a recovery in the peso currency.


The Banco de Mexico is expected to leave unchanged its benchmark rate 7.00 percent in its 1 p.m. [1800 GMT] announcement, according to 18 analysts surveyed by Reuters.


The central bank hiked rates in its previous seven meetings, taking the rate to a more than eight-year high.


One member of the board voted to hold rates at the last meeting, and analysts expect the bank will now signal a pause after raising its main rate by 400 basis points since the end of 2015 to counter repeated slumps in the peso.


Data on Wednesday showed the annual inflation rate continued to rise in July to 6.44 percent, its highest since the end of 2008. Finance Minister Jose Antonio Meade noted that if a jump in tomato prices had been factored out, inflation would have begun to drop in July.


Policymakers and private analysts think the inflation rate will fall back by next year. The central bank has said the annual rate will converge toward 3 percent by the end of the year, while economists see it coming down to 3.8 percent.

In an interview with Reuters last month, Banco de Mexico Governor Agustin Carstens said it was likely the bank would pause its cycle of interest rate hikes this month.

A recovery in the Mexican peso this year has dampened concerns that persistent currency weakness could fan inflation even higher.

Mexico's peso rallied from a record low in January as U.S. President Donald Trump backed away from threats to impose big tariffs on imports from Mexico and moved toward a renegotiation of the North American Free Trade Agreement.

The peso has slipped in August ahead of the start of NAFTA talks, trading past 18 per dollar this week. Meade said Wednesday that the peso was still at levels that would help ease inflation pressures.

Mexico's economy is expected to grow around 2 percent this year, and the market is pricing in interest rate cuts after the middle of next year.

(Reporting by Michael O'Boyle; Editing by Toni Reinhold)