EMERGING MARKETS-Latam FX mixed as Fed keeps rates steady; Brazil's central bank rate decision awaited

By Pranav Kashyap and Nikhil Sharma

May 7 (Reuters) - Latin American currencies were mixed on Wednesday after the U.S. Federal Reserve kept interest rates unchanged, while the focus shifted to the policy verdict from Brazil's central bank later in the day.

The MSCI gauge for Latin American currencies .MILA00000CUS dipped 0.2%, while the regional gauge for equities .MILA00000PUS was flat.

The U.S. central bank said the risks of higher inflation and unemployment have risen, further clouding the economic outlook as the Fed grapples with the impact of U.S. tariff policies.

Meanwhile, Brazil's central bank is set to announce its interest rate decision at 5:30 p.m. ET (2130 GMT) and is expected to lift its benchmark rate by 50 basis points to 14.75% — its highest level in almost 20 years.

"The better news for the Central Bank of Brazil has been the expectations for overall global growth that have allowed to reduce the amount of hikes and receive a bit less pressure, and eventually consider hiking 50 or even 25 (basis points) at this point, without it being particularly shocking," said Alejandro Cuadrado, global head of FX and LatAm Strategy at BBVA.

Economists surveyed by Brazil's central bank foresaw monetary policy easing only at the tail end of 2025.

The local real BRL= fell 0.6% on the day, on pace for its third consecutive session of declines, while the benchmark stock index .BVSP was mostly steady.

The real has been the worst performer in the region year-to-date, as the central bank grapples with an economy running hot as inflation surged to 5.49% in the twelve months leading to mid-April, marking its swiftest pace in over two years.

Meanwhile, fresh data indicated a 1.2% rise in Brazil's industrial production in March compared to February. The country's trade surplus dipped slightly by 3.3% in April from a year earlier.

Mexico's local bourse .MXX jumped 1.2%, with the peso MXN= also advancing 0.3%. The optimism was buoyed by a "productive meeting" between Mexican economy chief Marcelo Ebrard and senior U.S. officials late on Tuesday.

Analysts have lauded President Claudia Sheinbaum's strategic negotiations aimed at reducing tariffs with Mexico's largest trading partner.

Mexican central bank governor Victoria Rodriguez told Reuters that she expects further cuts to the benchmark interest rate if inflation holds steady as expected.

Similarly, Deputy Governor Jonathan Heath said on Wednesday that there was still room for Mexico's central bank to lower interest rates.

The Bank of Mexico will announce its next monetary policy decision on May 15. The announcement will come amid an uncertain period for Latin America's second-largest economy, given it has been at the receiving end of Washington's on-again, off-again tariff threats in recent months.

However, the global trade tensions have been appearing to ease lately, especially between the United States and China.

U.S. Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer will meet China's economic tsar He Lifeng in Switzerland on Saturday for talks after weeks of tit-for-tat tariffs between the top two economies.

In Chile, data showed the world's largest copper-producing country exported $4.52 billion of the red metal in April, up 8.2% from a year earlier.

The nation's peso CLP= slipped 0.7%, in tandem with lower copper prices. MET/L

Elsewhere, Romania's leu EURRON= hit a fresh record low on Wednesday. The currency plunged more than 2% in the previous session after the first-round win of a far-right opposition leader in a weekend presidential election.

In Asia, India's rupee INR= witnessed its steepest intraday fall in nearly a month after the country carried out military strikes in nine Pakistani sites in response to April killings by Islamist militants in Indian-administered Kashmir last month.

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