EMERGING MARKETS-Latam FX subdued, stocks fall on rate hike jitters

* Mexico’s annual inflation hit its lowest in more than two years * Brazil’s Senate approves govt’s new fiscal rules * Brazilian central bank maintains its benchmark interest rate * Stocks off 1.2%, FX flat By Siddarth S June 22 (Reuters) – Most Latin American currencies were subdued on Thursday against a weaker dollar following the U.S. Federal Reserve’s hawkish tone that was further echoed by the Bank of England’s jumbo rate hike. MSCI’s Latam currencies index was subdued by 1508 GMT, against a firm dollar. The Bank of England raised interest rates by a bigger-than-expected half a percentage point on Thursday that came after Fed Chair Jerome Powell signaled a hawkish tone on Wednesday. Further Federal Reserve rate increases are “a pretty good guess” of where the central bank is heading if the economy continues in its current direction, Fed Chair Jerome Powell said in remarks to lawmakers on Capitol Hill. Brazil’s real slipped 0.2% against the dollar, after the country’s central bank maintained its benchmark interest rate on Wednesday, but took a more dovish tone on its future steps by excluding from its policy statement the possibility of upcoming rate hikes. Brazilian President Luiz Inacio Lula da Silva on Thursday renewed his calls on the central bank to lower interest rates. “We were considering the Copom (rate-setting committee) will start cutting rates in August,” said Bertrand Delgado, Latam strategist at Societe Generale. “The inflation dynamics are improving and the uncertainty around the fiscal framework to a large degree has dissipated,” Delgado added. Brazil’s Senate on Wednesday approved fiscal rules proposed by President Luiz Inacio Lula da Silva’s government, considered vital in preventing a surge in public debt. Mexico’s peso, the currency of a major oil producer, fell 0.3% against the greenback tracking a fall in oil futures as investors were concerned over further rate hikes. Mexico’s annual inflation hit its lowest in more than two years ahead of a monetary policy decision later in the day where the central bank is expected to leave interest rates at a cycle high as the consumer price index remains above target. Broader EM equities index was down 1.2% spurred by investor jitters over further monetary policy tightening. The Colombian peso was the sole gainer among Latam currencies, adding 0.3% against the dollar. Chile’s peso and the Peruvian sol were subdued against the greenback. Elsewhere, Turkey’s central bank hiked its key rate by 650 basis points to 15% that missed expectations and said it would go further in a reversal of President Tayyip Erdogan’s policy. Key Latin American stock indexes and currencies at 1508 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1000.66 -0.36 MSCI LatAm 2465.87 -1.27 Brazil Bovespa 118658.59 -1.46 Mexico IPC 53737.35 -0.6 Chile IPSA 5766.71 -0.28 Argentina MerVal 425354.15 -1.059 Colombia COLCAP 1143.37 -0.73 Currencies Latest Daily % change Brazil real 4.7731 -0.13 Mexico peso 17.1650 -0.29 Chile peso 804 -0.07 Colombia peso 4121.31 0.49 Peru sol 3.6391 -0.64 Argentina peso 252.4500 -0.22 (interbank) Argentina peso 488 0.82 (parallel) (Reporting by Siddarth S in Bengaluru, Editing by Nick Zieminski)