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Brazil's real hits five-month low, traders expect rate

hold

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BofA predicts end of easing cycle, sees possible final

25bp cut

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Lula criticizes central bank chief

(Updated at 3:24 p.m. EDT/ 1924 GMT)

By Sruthi Shankar and Shristi Achar A

June 19 (Reuters) - A gauge of Latin American currencies

dipped on Wednesday, with the Brazilian real falling to a fresh

five-month low against the dollar as traders braced for a pause

in the central bank's monetary-easing cycle amid higher

inflation expectations.

The real weakened to 5.4556 per dollar, hovering near

its lowest level since early January.

The MSCI index for Latin America currencies

slipped 0.5%, as most currencies in the region, including the

Mexican peso, also dipped in light trading due to a U.S.

market holiday.

Brazil's central bank is widely seen leaving the benchmark

Selic rate at a still-high 10.50%, according a Reuters poll,

ending a series of six 50-basis-point rate cuts, which it kicked

off last year.

The focus now is on how long the pause will last, after

surprisingly strong consumer price data in May sealed the case

for a possible decision to keep rates unchanged.

"The easing cycle is already over, based on market pricing.

We believe there is one final 25bp (basis-point) rate cut but it

is a close call. The important thing, however, is that real

policy rates would remain at a contractionary level for the rest

of the year," BofA analysts said in a recent note.

"Even with a 25bp rate cut to 10.25%, the ex-ante real rate

would be around 7.3%, well above the 4.5% the central bank views

as neutral."

Brazil President Luiz Inacio Lula da Silva criticized the

central bank on Tuesday, saying its chief, Roberto Campos Neto,

was harming Latin America's largest economy, while signaling he

will appoint a substitute who is not swayed by market jitters.

With a more than 10% drop this year, the real is among the

worst-performing currencies in the region, hurt by increasing

fiscal worries and a drop in speculative flows due to a

reduction of spreads between Brazilian and U.S. interest

rates.

The Chilean peso bucked the larger trend to add

nearly 0.7% as copper prices climbed and the central bank raised

its GDP and inflation forecast for 2024.

Chile's central bank lowered its benchmark interest rate by

25 basis points to 5.75% on Tuesday, in line with market

expectations, in a bid to boost the South American country's

economy.

"Our base case is that cuts will likely continue in the near

term - with some pauses along the way - with the rate falling

further to around 5.0% by Q4, and 4.0% in 2025," noted Andres

Abadia, chief LatAm economist at Pantheon Macroeconomics.

Key Latin American stock indexes and currencies:

Latest Daily %

change

MSCI Emerging Markets 1094.80 1.2

MSCI LatAm 2168.14 -0.35

Brazil Bovespa 119959.97 0.28

Mexico IPC 53264.29 0.05

Chile IPSA 6567.79 0.38

Argentina MerVal 1577661.77 1.299

Colombia COLCAP 1384.71 -0.35

Currencies Latest Daily %

change

Brazil real 5.4556 -0.41

Mexico peso 18.4350 -0.22

Chile peso 930.6 0.69

Colombia peso 4161 -0.44

Peru sol 3.8032 -0.15

Argentina peso (interbank) 903.5000 0.00