(Updated at 1503 GMT)

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Bank of Mexico seen holding key interest rate at 11%, poll

shows

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Brazil's inflation slows in mid-June despite food price

pressure

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Kenya president backs down on tax rises after deadly

protests

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Latam stocks, FX down 0.8% each

By Johann M Cherian

June 26 (Reuters) - Brazil's real underperformed its

Latin American peers on Wednesday, hitting levels last seen 19

months ago as investors assessed President Lula's comments on

government spending and the local central bank's standing on

monetary policy.

The currency dropped nearly 1% on the day.

President Luiz Inacio Lula da Silva pushed back against

spending cuts in an interview with local media outlet UOL, while

adding that the current levels of interest rates of 10.5% were

high with inflation at 4%.

Traders have been on edge about central bank independence

after the regulator shifted to a more hawkish stance on interest

rates recently. The real and the benchmark share index

are among bottom performers in the region.

Still, Felipe Camargo, senior emerging markets economist at

Oxford Economics said: "We expect President Lula to limit

himself to a combative rhetoric, but not actively intervene or

make politically motivated central bank board appointments that

could undermine its credibility."

Separately, data showed consumer prices in the region's

largest economy rose less than expected by mid-June despite

pressure from food inflation.

MSCI's index tracking currencies in resources-rich Latin

America dropped 0.8% to a two-week low, as the

dollar strengthened.

Market participants await a crucial U.S. inflation report

due on Friday that could offer more clues on the trajectory of

the Federal Reserve's monetary policy trajectory, which could

impact the strength of the greenback.

Oil exporter Mexico's peso depreciated 0.6% as

investors prepared for a Banxico monetary policy decision on

Thursday, while also keeping an eye out for executive

appointments in President elect Claudia Sheinbaum's new

government.

A Reuters poll showed the local central bank is expected to

hold its benchmark interest rate steady at 11%, as inflationary

pressures continue and the peso's depreciation following the

June 2 general elections.

Fellow oil producer Colombia's peso also dropped

0.8%, while copper producer Chile's peso slipped 0.7%.

On the equities front, an index tracking regional stocks

dropped 0.8%.

Heavy-weight Brazil's Bovespa shed 0.5%, as yields

on local bonds climbed over 10

basis points each.

Mexico's main stock index added 0.2%, while Chilean

equities gained around 1.6%.

Argentina's MerVal index shed 0.5%, with attention

squarely on the vote on several bills in the country's lower

house due on Thursday, that could influence president Javier

Milei's plans for the embattled economy.

Elsewhere in emerging markets, Kenya's president withdrew

planned tax rises, bowing to pressure from protesters who had

stormed parliament, launched demonstrations across the country

and threatened more action this week. The local shilling

however was flat.

Key Latin American stock indexes and currencies:

Latin American market

prices from Reuters

Stock indexes Latest Daily %

change

MSCI Emerging Markets 1085.82 0.05

MSCI LatAm 2178.24 -0.83

Brazil Bovespa 121755.20 -0.47

Mexico IPC 52674.32 0.13

Chile IPSA 6515.33 1.61

Argentina MerVal 1560882.64 -0.62

Colombia COLCAP 1367.93 0

Currencies Latest Daily %

change

Brazil real 5.4999 -0.84

Mexico peso 18.1600 -0.37

Chile peso 948.5 -0.91

Colombia peso 4109.5 -0.55

Peru sol 3.8175 -0.43

Argentina peso 910.0000 -0.05

(interbank)

Argentina peso 1360 0.37

(parallel)

(Reporting by Johann M Cherian in Bengaluru; Editing by Emelia

Sithole-Matarise)