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Brazil's c.bank concerned with inflation expectations
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Mexico annual inflation rate was 6.25% in April
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Latam FX off 0.4%, stocks down 0.2%
By Bansari Mayur Kamdar May 9 (Reuters) - Mexico's peso was flat against the dollar after figures showed annual inflation continued to moderate in April, fuelling hopes the Bank of Mexico's monetary tightening cycle may be ending. Mexico's annual inflation rate slowed for the third consecutive month, to 6.25%, according to the data. "This means that another 25 basis point interest rate hike at next week's Board meeting is no longer a certainty, but we think that a final increase in the policy rate is still more likely than not," said Jason Tuvey, deputy chief emerging markets economist at Capital Economics, in a note.
Banxico, as the Mexican central bank is known locally, hiked the benchmark interest rate by 25 basis points to 11.25% in late March, moderating the pace of its tightening cycle and taking a more dovish tone on the future of rate moves. Overall, the MSCI's index for emerging market currencies slipped 0.4% by 10:00 am ET (1400 GMT) as the U.S. dollar strengthened with investors nervous ahead of inflation data this week and U.S. debt ceiling talks. Weakness in commodity prices also weighed on currencies of the resources-heavy region, with oil and copper prices sliding after data from top consumer China suggested weak growth and demand. The Colombian peso shed 0.5%, tracking weak crude prices. The Brazilian real rose 0.4% against the greenback. Minutes from Brazil's central bank's May 2-3 meeting showed it remained concerned about inflation expectations, which have slightly deteriorated despite the government's anticipated fiscal rules providing some relief to public debt prospects. "We expect the beginning of an easing cycle in November, recognizing the risks of an earlier cut particularly if the government makes a credible and public commitment to the 3% target," said economists at J.P. Morgan in a note. Chile's peso added 0.3% against the dollar, after closing lower on Monday in a volatile session as right-wing parties won a majority of seats in a new council on Sunday that will lead a redraft of the country's dictatorship-era constitution. Elsewhere in emerging markets, Pakistan's anti-corruption agency arrested former Prime Minister Imran Khan at Islamabad High Court, in a dramatic move that threatens fresh turmoil in the country as Khan's party called for nationwide protests.
Key Latin American stock indexes and currencies:
Latest Daily % change MSCI Emerging Markets 981.56 -0.8 MSCI LatAm 2268.75 -0.18 Brazil Bovespa 106206.40 0.15 Mexico IPC 54935.66 -0.18 Chile IPSA 5596.57 -0.21 Argentina MerVal 0.00 0 Colombia COLCAP 1157.35 -0.01
Currencies Latest Daily % change Brazil real 4.9988 0.30 Mexico peso 17.7914 -0.01 Chile peso 795.5 0.09 Colombia peso 4496.33 0.20 Peru sol 3.6868 0.00 Argentina peso (interbank) 228.0000 -0.15
(Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Susan Fenton)
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