Global crisis may be past worst: Mexico

Reporting by Jason Lange and Alistair Bell

MEXICO CITY (Reuters) - The world economic crisis is probably past the worst and the global economy is likely no longer in a free fall, Mexican Central Bank Gov. Guillermo Ortiz said on Friday.

Many countries have stopped cutting their economic growth forecasts and there has been a reduction in debt spreads, suggesting investors are becoming less risk averse, Ortiz told the Reuters Latin American Investment Summit in Mexico City.

"There is a sensation that we have probably touched bottom in this crisis," said Ortiz, also the head of the Bank for International Settlements.

The Mexican economy is likely to contract in the third quarter of this year on an annual basis but should show growth compared with the previous quarter, he said.

"Simply put, I think that we have firm signs that we will see a better second half compared to what we saw in the first half," he said.

Mexico's inflation rate is likely to diminish as demand from industry and consumers falls and the peso currency stabilizes, he said.

Stubborn inflation, caused partly in recent months by a slump in Mexico's peso as a result of the global credit debacle, has kept the central bank from cutting interest rates as aggressively as many other emerging market countries.

Most economists see Mexico cutting interest rates for the fifth straight month on May 15 and then more in coming months to fight a sharp contraction in the economy.