*

Latam stocks down 0.2%, FX down 0.3%

*

U.S. Fed keeps rates unchanged

*

Brazil's rate decision due later in the day

*

Mexico Q1 private spending down 0.4% from previous quarter

*

Colombia's Senate approves labor reform

(Updates with mid-session prices)

By Nikhil Sharma and Pranav Kashyap

June 18 (Reuters) -

Latin American assets slipped on Wednesday as traders

awaited an interest rate decision from Brazil's central bank

against the backdrop of escalating

Middle East turmoil

.

MSCI's index for Latin American currencies

slipped 0.3% while a similar gauge of the

equities lost 0.2%.

Geopolitical risk loomed, as the threat of U.S. intervention

in the Israel-Iran conflict sent a jolt through global markets,

following President Donald Trump's demand for Tehran's

unconditional surrender, a move swiftly dismissed by Iran's

Supreme Leader, Ayatollah Ali Khamenei.

As fighting raged into its sixth day and Israeli jets

thundered over Tehran, thousands fled the Iranian capital,

injecting fresh volatility into an already unsettled landscape.

According to a source with knowledge of internal

discussions, Trump and his advisers are actively mulling

options, including possible joint strikes with Israel on Iranian

nuclear facilities.

Against this backdrop, the Brazilian real was

flat, while Sao Paulo's benchmark stock index edged down

0.2%.

All eyes were on Brazil's central bank, with the market

consensus pointing towards a

rate-hike pause

after an aggressive tightening cycle that began in

September 2024, pushing interest rates to a near 20-year high at

14.75%.

The monetary authority finds itself walking a tightrope,

cooling off a red-hot economy while navigating the ripple

effects of Trump-era tariffs.

Inflation remains stubbornly above target, and this

week's

stronger-than-expected

activity data means a surprise rate hike can't be ruled

out.

"Given the already restrictive monetary policy, the risk of

sharp interest rate cuts in the near future is also reduced.

This would be a positive development for the Brazilian real,"

said Michael Pfister, FX analyst at Commerzbank.

Meanwhile, the U.S. Federal Reserve kept rates unchanged at

4.25-4.50%. Policymakers signaled rate cuts are on the horizon,

but the trajectory is now less dovish, as inflationary pressure

from Trump's tariff plans tempers expectations.

"Markets appear to be settling on a (slight) hawkish

interpretation of the Fed festivities," said Matthew Weller,

global head of research at StoneX.

Elsewhere in the region, Chile's central bank left its

benchmark rate unchanged at 5%, as annual inflation still sits

above its 2% to 4% comfort zone. The Chilean peso gained

0.2%, while Santiago stocks slipped 0.4%.

Mexico's peso slipped 0.2% against the dollar, as

traders braced for next week's Bank of Mexico meeting, where a

fourth consecutive 50-basis-point cut is widely anticipated.

Data showed Mexican private spending dipped 0.4% in Q1

from the previous quarter. The local equity index inched

up 0.1%.

Colombia's peso jumped 0.4% to a three-month high,

while 1.3% gain was seen in the benchmark stock index.

Colombia's Senate, meanwhile,

approved

a revised labor reform bill after President Gustavo Petro

called for a referendum to secure public backing for the

initiative.

Argentina's main stock index lost 0.8%, while the

Argentine peso jumped 2%.

Key Latin American stock indexes and currencies:

MSCI Emerging Markets 1192 -0.41

MSCI LatAm 2285.42 -0.21

Brazil Bovespa 138583.34 -0.18

Mexico IPC 56763.11 0.15

Argentina Merval 2055268.1 -0.829

5

Chile IPSA 8059.72 -0.39

Colombia COLCAP 1653.03 1.32

Brazil real 5.5006 -0.03

Mexico peso 19.0332 -0.17

Chile peso 941.84 0.2

Colombia peso 4067.5 0.7

Peru sol 3.594 -0.1

Argentina peso (interbank) 1142 2.01

Argentina peso (parallel) 1170 2.56