*

Colombia cbank board faces dilemma over magnitude of rate

cut

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Brazil private economists forecast two 50-bps hikes this

year

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Chile's president proposes 2.7% spending increase in 2025

budget

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Latam FX down 0.4%, stocks down 0.6%

By Ankika Biswas

Sept 30 (Reuters) - Colombia's peso rose in line with

most of its regional peers on Monday, ahead of the country's

monetary policy decision, with an index tracking Latin American

currencies on course for its biggest monthly advance in ten

riding on a metal prices rally.

The Colombian peso edged up 0.2% against the dollar,

with the local interest rate decision scheduled for 2 p.m. ET

(1800 GMT).

Uncertainty around local inflation pressures could see the

board of Colombia's central bank be split over the magnitude of

a possible rate cut. A Reuters survey showed analysts forecast

either a 50-basis-point cut to 10.25%, or a 75-bps one.

Jamaica's interest rate decision is also due later in the

day.

These follow a 25-bps rate hike by Brazil and a 25-bps cut

by Mexico this month.

A survey showed Brazil's private sector economists now

project a more restrictive path for interest rates, with two

50-basis-point hikes expected this year and higher borrowing

costs next year.

Brazil's real was down 0.5% on the day, but was the

top Latam currency performer for the month with a near 3% jump

against the greenback.

"Fears (of sovereign debt load) returned in mid-2024 as

revenues fell short and expenditures stayed high. A conservative

central bank is now keeping monetary policy tight to push back

against the risk of expansive fiscal policy and rising inflation

expectations," Macquarie strategists noted.

"But there's a risk that the BCB becomes structurally more

dovish after 2024, with the coming BCB leadership change.

Two-way risks seem to be pronounced, but skewed toward higher

USD/BRL as commodity prices (oil, iron) fall."

Further, data showed the country's public sector posted a

larger-than-expected deficit in August, driven by a mismatch

between central government revenues and expenditures.

The MSCI index for Latam currencies was set

for its best month since last November, despite slipping into

the red for the day from an over one-week high. The stock index

eyed its third straight monthly advance.

The strength in the Latam asset classes has been fuelled by

optimism around a Federal Reserve interest-rate cut and soaring

metal prices on the back of top consumer China's stimulus

measures that have shored up the metals demand outlook.

Top copper producers Chile's peso and Peru's sol

also enjoyed monthly gains on the back of the recent

rally in the red metal's prices.

Chile's government is proposing a 2.7% annual increase in

its 2025 budget, President Gabriel Boric said, adding plans to

boost pensions, healthcare and focus on increasing national

security.

Meanwhile, Argentine President Javier Milei intends to shake

up the country's mid-term legislative elections next year, as

the country battles its worst economic crisis in decades.

Key Latin American stock indexes and currencies at 1433 GMT:

Equities Latest Daily % change

MSCI Emerging Markets 1171.99 -0.22

MSCI LatAm 2246.95 -0.57

Brazil Bovespa 132717.18 -0.01

Mexico IPC 52630.23 -0.28

Chile IPSA 6513.5 -0.26

Argentina Merval 1727776.56 NULL

Colombia COLCAP 1314.79 -0.46

Currencies Latest Daily % change

Brazil real 5.4623 -0.54

Mexico peso 19.6311 0.36

Chile peso 897.75 0.21

Colombia peso 4171.34 0.16

Peru sol 3.7056 -0.22

Argentina peso (interbank) 969 -0.206398349

Argentina peso (parallel) 1225 0.408163265