*

Mexican economy up 1.1% y/y in August- preliminary

estimate

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South Africa joins easing club with 25 bps rate cut

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Turkish central bank keeps rates steady, alters guidance

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Argentine stocks headed for record high close

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Both Latam FX and stocks up 0.3%

(Updated at 3:25 p.m. ET/ 1925 GMT)

By Ankika Biswas and Shashwat Chauhan

Sept 19 (Reuters) - Brazil's real outpaced its regional

peers on Thursday after the central bank kicked off an interest

rate-hiking cycle and signaled more increases, while key indexes

for Latin American assets climbed after an outsized U.S. rate

cut overnight.

The real hit a one-month intraday high, strengthening

0.7% against the dollar, following an expected 25-basis-point

rate hike and as the central bank hinted at upcoming rises to

tackle a challenging inflation outlook driven by

stronger-than-expected economic activity.

The rise in the benchmark Selic interest rate for the first

time in over two years also comes in the face of the Federal

Reserve's larger-than-usual 50-bps cut in U.S. interest rates

and projections of another half-a-percentage-point cut by

year-end.

"Many market participants anticipated this move, but

some believe it could be more symbolic, helping to boost

confidence in the BCB's (Banco Central do Brasil's) commitment

to inflation control," said Albie Manderson, FX risk manager at

Deaglo.

This widens the interest rate differential between Brazil

and the U.S., likely supporting the real by attracting capital

inflows and easing inflationary pressures through lower import

prices.

"The widening interest rate differential adds further

complexity to the BCB's decision-making process. However, this

move could help temper pressures on the Brazilian real."

The real's gains helped the MSCI gauge tracking Latam

currencies to gain 0.3%, with the Colombian peso

also rising 0.2%, while Peru's sol held steady at

3.7333 per dollar.

"Depreciation of the greenback would be beneficial for

many emerging markets that carry significant levels of

dollar-denominated debt, such as Turkey and Argentina,"

economists at the Institute of International Finance wrote in a

report led by Chief Economist Marcello Estevão.

On the data front, a preliminary estimate showed Mexico's

economy likely expanded 1.1% in August compared with the same

month a year earlier. The Mexican peso held firm at

19.305 per greenback.

The MSCI Latam stocks index was up 0.3%,

rising for the seventh straight session, led by strong gains in

Argentine stocks, which was headed for an all-time high

close.

Argentina posted an eighth consecutive primary

fiscal surplus

in August, as the government pursues stringent austerity

measures to tackle an economic crisis.

Elsewhere in emerging markets, South Africa took a measured

tone after its first rate cut in more than four years, while

Turkey held its main interest rate steady at 50% for a sixth

straight month.

The Turkish lira was last up 0.2%, while South

Africa's rand held firm at 17.53 per greenback.

Angola left its main interest rate unchanged at 19.50% after

inflation started easing last month, while Ukraine kept its key

rate unchanged at 13% for the second consecutive time.

Markets in Chile were shut for a public holiday.

Key Latin American stock indexes and currencies:

MSCI Emerging Markets 1100.04 1.13

MSCI LatAm 2275.06 0.33

Brazil Bovespa 133455 -0.22

Mexico IPC 52896.01 0.6

Chile IPSA 6323.95 -0.36

Argentina Merval 1848227.0 1.825

1

Colombia COLCAP 1314.8 0.58

Brazil real 5.4252 0.66

Mexico peso 19.305 -0.11

Chile peso 930.35 0.13

Colombia peso 4160.47 0.17

Peru sol 3.7333 0.09

Argentina peso (interbank) 962.5 0

Argentina peso (parallel) 1220 3.278688525