*

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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Latam FX up 0.3%, stocks up 0.2%

By Ankika Biswas

Sept 19 (Reuters) - Brazil's real outperformed 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 high, strengthening 1%

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 and projections of

another half-a-percentage-point cut by year-end.

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 fiscal framework remains vulnerable but, for now, we

think authorities have done enough to calm markets on this front

as risks for 2024 have subsided. The BCB is in a hiking cycle,

building carry back into the FX while the rest of the world is

easing rates," Barclays analysts noted.

The analysts recommended staying bullish on the real versus

the dollar, owing to policy divergence.

The real's gains helped the MSCI gauge tracking Latam

currencies to gain 0.3% to a one-month high,

while weakness in the Colombian peso and Peru's sol

capped gains in the index.

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 edged 0.1% lower

against the dollar.

The MSCI Latam stocks index was up 0.2%,

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

Argentine stocks.

Elsewhere, South Africa took a measured tone after its first

rate cut in more than four years, saying although inflation had

fallen faster than expected there were still risks to the

outlook.

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

straight month, as expected, saying it remained highly attentive

to inflation risks but removing a reference to potential

tightening.

While the lira was little changed against the

dollar, the main Istanbul stock index climbed 2%.

Among other policy decisions, 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 and said it expected inflation to

continue to increase in the coming months.

Key Latin American stock indexes and currencies at 1500 GMT:

Equities Latest Daily % change

MSCI Emerging Markets 1099.51 1.08

MSCI LatAm 2281.44 0.61

Brazil Bovespa 134220.51 0.35

Mexico IPC 52762.9 0.34

Chile IPSA 6323.95 -0.36

Argentina Merval 1850185.36 1.92

Colombia COLCAP 1312.04 0.37

Currencies Latest Daily % change

Brazil real 5.4104 0.96

Mexico peso 19.305 -0.11

Chile peso 930.35 0.2

Colombia peso 4186.5 -0.46

Peru sol 3.7497 -0.35

Argentina peso (interbank) 962.5 0

Argentina peso (parallel) 1240 2.419354839

(Reporting by Ankika Biswas in Bengaluru)