EMERGING MARKETS-Latam markets higher as investors assess US inflation data; tariffs remain on radar

By Shashwat Chauhan and Purvi Agarwal

March 12 (Reuters) - Most Latin American currencies firmed on Wednesday after a U.S. inflation reading that hinted at sooner cuts by the Federal Reserve, though uncertainty around U.S. President Donald Trump's trade policies showed no signs of abating.

U.S. consumer prices increased less than expected in February, but the improvement is likely to be temporary against the backdrop of aggressive tariffs on imports that are expected to raise the costs of most goods in the months ahead.

"This data reinforces expectations that the Fed may slightly soften its monetary policy rhetoric... but will probably maintain caution before leaning fully toward a more dovish stance," said Quasar Elizundia, research strategist at Pepperstone.

Traders currently price in more than 70 basis points of easing till the end of the year, according to LSEG data.

A 2% jump in oil prices aided a 0.5% gain in the Colombian peso COP=, while Mexico's MXN= strengthened 0.4%.

Brazil's real BRL= reversed early declines to climb 0.2% as investors parsed inflation data that showed annual inflation exceeded 5% for the first time in over a year in February.

It remained well above the official target ahead of a policy meeting at which the central bank is likely to press ahead with aggressive monetary tightening.

"Next week's meeting will see the final 100 bps hike in the tightening cycle, but the likelihood of one or two smaller hikes after that is rising, with inflation far above the central bank's target range," said William Jackson, chief EM economist at Capital Economics.

Tariff headlines continued to dominate, with U.S. Commerce Secretary Howard Lutnick saying nothing would stop President Donald Trump's expanded 25% tariffs on steel and aluminum until U.S. domestic production is strengthened, and that Trump will add copper to his trade protections.

Brazil's Finance Minister Fernando Haddad and Mexican President Claudia Sheinbaum said they would not immediately retaliate and would instead seek negotiations with the U.S. government, while Canada announced counter tariffs.

Chile's peso CLP= fell 0.2%, while MSCI's index for Latin American currencies .MILA00000CUS rose 0.4%, on track to snap a three-session losing streak.

The equities gauge .MILA00000PUS advanced 1.2%, as regional bourses bounced back after a sell-off earlier this week.

Argentina .MERV led gains with a 5.3% jump, while Colombia's COLCAP .COLCAP was up 1.2%

Elsewhere, South Africa's rand ZAR= was last down 0.8% after the National Treasury proposed a smaller hike in value-added tax in a revised budget aimed at ending deadlock within the coalition government.

Ukraine's international dollar bonds broadly advanced around 1 cent a piece after Kyiv expressed support for Washington's proposal of a 30-day ceasefire with Russia.

The National Bank of Poland (NBP) left its main interest rate unchanged at 5.75%, and the zloty EURPLN= was little changed.

Key Latin American stock indexes and currencies: