EMERGING MARKETS-LatAm assets fall on Fed policy outlook; Brazil rate verdict also on tap

By Niket Nishant and Nikhil Sharma

Dec 10 (Reuters) - Latin American assets edged down on Wednesday after the U.S. Federal Reserve, which cut interest rates , signaled that it will likely pause further reductions in borrowing costs, while Brazil's policy decision was on the radar.

The MSCI index of Latin American stocks .MILA00000PUS slid 0.2%, while the currencies gauge .MILA00000CUS lost 0.25%.

New projections issued after the U.S. central bank's two-day meeting showed the median policymaker sees just one quarter-percentage-point cut in 2026, the same outlook as in September.

"When you look further down the road there is a lot of uncertainty. And when we move past today's rate cut and into 2026, the tailwind from rate cuts is a lot less reliable. That could be a problem," said Chris Grisanti, chief market strategist, MAI Capital Management.

In Brazil, investors awaited the central bank's final policy decision of 2025, where it is widely expected to keep rates on hold.

Data on Wednesday showed Brazil's 12-month inflation slowed in November to its lowest level in more than a year.

The Bovespa index .BVSP rose 0.8%, steadying a day after being rattled by the presidential bid of Senator Flavio Bolsonaro, the eldest son of former President Jair Bolsonaro, who faces a 27-year prison sentence.

On Wednesday, lawmakers voted to shorten the prison sentence of former President, although the bill is likely to face resistance from senators, the Supreme Court and leftist President Luiz Inacio Lula da Silva.

The real BRL= fell 0.6% against the dollar, marking a second consecutive day of losses.

In Argentina, stocks .MERV gained 0.9% while the peso ARS=RASL rose 0.4%. The newly elected Congress will begin a period of special legislative sessions in which President Javier Milei intends to push a series of reforms he has said are necessary to boost the country's economy.

The country is also looking to issue bonds worth around $1 billion, targeting a coupon rate below 9%. Most of its dollar-denominated bonds were trading slightly higher.

Colombian stocks .COLCAP rose 0.6% and the local peso COP= added 0.61%.

Separately, Reuters reported that the country's guerrilla group, the National Liberation Army, is willing to resume peace negotiations with the current government, or with whichever new government is elected next year if commitments previously agreed upon at stymied peace talks are honored.

Chilean equities .SPIPSA were down 0.1%. Far-right candidate Jose Antonio Kast is widely expected to win Chile's presidential run-off on Sunday and become the country's most conservative leader since its military dictatorship. The peso CLP= rose 0.55% against the greenback.

"A Kast victory would reinforce the recent surge of right and far-right political actors in Latin America," wrote Ken Roberts, a professor of government with a specialization in Latin American politics at Cornell University.

"But it would also continue a much longer pattern of volatile anti-incumbent voting in Latin America's turbulent democratic waters."

Separately, Mexico's lower house approved tariffs of up to 50% from next year on imports from China and several other Asian countries. Stocks .MXX lost 0.34% and currency MXN= was largely unchanged.

Mexico's economy is solid and resilient , its central bank said in the Latin American nation's financial stability report, even as domestic financial risks increased.

Meanwhile, data from a banking trade group showed that foreign investors sold emerging market stocks in November at the fastest pace in eight months, turning overall portfolio flows negative for the first time since April.

Key Latin American stock indexes and currencies: