*
Latam stocks down 0.2%, FX down 0.3%
*
U.S. Fed keeps rates unchanged
*
Brazil's rate decision due later in the day
*
Mexico Q1 private spending down 0.4% from previous quarter
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Colombia's Senate approves labor reform
(Updates with mid-session prices)
By Nikhil Sharma and Pranav Kashyap
June 18 (Reuters) -
Latin American assets slipped on Wednesday as traders
awaited an interest rate decision from Brazil's central bank
against the backdrop of escalating
Middle East turmoil
.
MSCI's index for Latin American currencies
slipped 0.3% while a similar gauge of the
equities lost 0.2%.
Geopolitical risk loomed, as the threat of U.S. intervention
in the Israel-Iran conflict sent a jolt through global markets,
following President Donald Trump's demand for Tehran's
unconditional surrender, a move swiftly dismissed by Iran's
Supreme Leader, Ayatollah Ali Khamenei.
As fighting raged into its sixth day and Israeli jets
thundered over Tehran, thousands fled the Iranian capital,
injecting fresh volatility into an already unsettled landscape.
According to a source with knowledge of internal
discussions, Trump and his advisers are actively mulling
options, including possible joint strikes with Israel on Iranian
nuclear facilities.
Against this backdrop, the Brazilian real was
flat, while Sao Paulo's benchmark stock index edged down
0.2%.
All eyes were on Brazil's central bank, with the market
consensus pointing towards a
rate-hike pause
after an aggressive tightening cycle that began in
September 2024, pushing interest rates to a near 20-year high at
14.75%.
The monetary authority finds itself walking a tightrope,
cooling off a red-hot economy while navigating the ripple
effects of Trump-era tariffs.
Inflation remains stubbornly above target, and this
week's
stronger-than-expected
activity data means a surprise rate hike can't be ruled
out.
"Given the already restrictive monetary policy, the risk of
sharp interest rate cuts in the near future is also reduced.
This would be a positive development for the Brazilian real,"
said Michael Pfister, FX analyst at Commerzbank.
Meanwhile, the U.S. Federal Reserve kept rates unchanged at
4.25-4.50%. Policymakers signaled rate cuts are on the horizon,
but the trajectory is now less dovish, as inflationary pressure
from Trump's tariff plans tempers expectations.
"Markets appear to be settling on a (slight) hawkish
interpretation of the Fed festivities," said Matthew Weller,
global head of research at StoneX.
Elsewhere in the region, Chile's central bank left its
benchmark rate unchanged at 5%, as annual inflation still sits
above its 2% to 4% comfort zone. The Chilean peso gained
0.2%, while Santiago stocks slipped 0.4%.
Mexico's peso slipped 0.2% against the dollar, as
traders braced for next week's Bank of Mexico meeting, where a
fourth consecutive 50-basis-point cut is widely anticipated.
Data showed Mexican private spending dipped 0.4% in Q1
from the previous quarter. The local equity index inched
up 0.1%.
Colombia's peso jumped 0.4% to a three-month high,
while 1.3% gain was seen in the benchmark stock index.
Colombia's Senate, meanwhile,
approved
a revised labor reform bill after President Gustavo Petro
called for a referendum to secure public backing for the
initiative.
Argentina's main stock index lost 0.8%, while the
Argentine peso jumped 2%.
Key Latin American stock indexes and currencies:
MSCI Emerging Markets 1192 -0.41
MSCI LatAm 2285.42 -0.21
Brazil Bovespa 138583.34 -0.18
Mexico IPC 56763.11 0.15
Argentina Merval 2055268.1 -0.829
5
Chile IPSA 8059.72 -0.39
Colombia COLCAP 1653.03 1.32
Brazil real 5.5006 -0.03
Mexico peso 19.0332 -0.17
Chile peso 941.84 0.2
Colombia peso 4067.5 0.7
Peru sol 3.594 -0.1
Argentina peso (interbank) 1142 2.01
Argentina peso (parallel) 1170 2.56
(Reporting by Nikhil Sharma and Pranav Kashyap; Editing by Ed
Osmond and Mohammed Safi Shamsi)
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