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MEXICO CITY, April 18 (Reuters) - The Mexican peso closed near a two-year high on Friday while long-term bond prices fell after the central bank held interest rates steady, warning of higher-than-expected inflation in the months ahead.

The 48-hour peso contract <MXN=> MEX01 strengthened 0.17 percent to 10.4665 per dollar at the official central bank close while the benchmark IPC stock index .MXX finished about flat at 31,795.68 points.

The peso has gained more than 4 percent this year as Mexico's relatively high yields attract investors. The currency has been trading at levels not seen since March 2006 for the past two and a half weeks.

"The peso responded marginally to the Bank of Mexico's statement, because the market had already priced in that the bank would not move its rate," said Miguel Angel Flores, an analyst at government bank Bansefi.

In its review, Mexico's central bank said food and commodities prices had fanned inflation more than expected in the first months of 2008. The bank said it would raise its inflation outlook for the coming months at its quarterly conference on April 30.

However, the bank also said the risks that domestic economic growth would be crimped by the U.S. slowdown had increased.

Investors responded by sharply paring back bets that the central bank would cut interest rates later this year.

The benchmark 10-year peso bond <MX10YT=RR> fell 0.477 of a point in price to bid 100.19, pushing its yield up 7 basis points to 7.72 percent.