EMERGING MARKETS-LatAm stocks climb, FX steady ahead of twin rate calls

By Pranav Kashyap

Sept 17 (Reuters) - Latin American stocks edged higher on Wednesday as investors counted down to a widely expected rate cut from the Federal Reserve, while Brazil braced for its own policy decision.

An index tracking the region's stocks .MILA00000PUS rose 0.6%, while a similar index for currencies .MILA00000CUS was up 0.1%.

Markets have largely priced in a 25-basis-point cut from the Fed — a move analysts are calling a "non-event." The real action lies in the Fed's dot plot, which could signal how aggressively it plans to ease rates amid a cooling labor market and growing political pressure from the White House.

Meanwhile, Brazil's central bank is expected to stand pat on interest rates at 1730 ET, keeping borrowing costs pinned at a near two-decade high — but the decision lands at a precarious crossroads, where the 15% rate is beginning to choke growth.

The real BRL= eased from an over one-year high hit in the previous session, and could snap a five-day winning run.

With the Fed gearing up to cut and Brazil holding firm, the widening yield gap could supercharge the real. As the dollar softens, Brazil's sky-high rates may lure carry trade flows, fueling demand for the currency. The real was up 14.2% year-to-date.

"Market participants will be watching for any adjustments on language within the statement (Brazil). I.e, if they remove reference to the very restrictive stance or those of the nature that suggests we may be moving into towards a cutting cycle," said Kathryn Exum, co-head of sovereign research at Gramercy.

"These would be well received by the market and investors will be watching for those types of changes."

Brazil .BVSP benchmark stock index extended its record-breaking run for a third straight session, while Mexico's .MXX eased from a record-high.

The Mexican peso MXN= also showed signs of fatigue, marginally lower, and could snap an eight-day winning streak — its longest since March 2024.

The country kicked off public consultations on the USMCA trade pact, seeking fresh insights into its impact and performance.

Meanwhile, Argentina's second-quarter GDP figures are due later in the day, with the country now standing out as one of Latin America's fastest-growing economy in 2025. A sharp rebound in investment and cooling inflation have powered the surge, driven by President Javier Milei's sweeping libertarian overhaul — from aggressive fiscal consolidation to deep subsidy cuts and deregulation.

Still, the peso ARS=RASL remains one of the worst-performing EM currencies this year, while Argentine stocks .MERV were also in the red.

"Macro imbalances still remain fairly sizable, policy has been restricted by the electoral cycle and high dollar needs into 2026 have caused Argentine assets to lag relative to the rest of the high yield space," Exum added.

On the day, the peso ARS=RASL rose 0.3%, and could snap a 11-day losing streak.

Most other Latin American markets have been on a steady climb this year, fueled by a shift away from U.S. assets amid political noise and economic jitters.

A softer dollar, dented by the repricing of Fed rate expectations, has only sweetened the deal, boosting the appeal of EM assets.

Chilean stocks .SPIPSA are leading regional gains, boasting a 35% year-to-date gain — nearly triple the S&P 500's .SPX rise.

Elsewhere, the Colombian peso COP= eased 0.1%, from an over one-year high hit on Tuesday, while the Chilean peso CLP= slipped 0.3%.

Key Latin American stock indexes and currencies: