Colombia central bank surprises with 25-bps cut
Brazil central bank intervenes in FX market
Latam stocks, FX indexes both up more than 1%
Updates with afternoon trading levels
By Lisa Pauline Mattackal and Shashwat Chauhan
Dec 20 (Reuters) - Latin American stocks and currencies jumped on Friday after a U.S. inflation print helped soothe some concerns over the path of interest rates in the world's largest economy, though indexes tracking both were set for a muted weekly finish.
Colombia's peso was flat against the dollar after the board of Colombia's central bank voted to its benchmark interest rate by a surprise 25 basis points to 9.50%, less than expected by the market, citing global financial pressures and the work of other central banks to raise their own interest rates.
MSCI's index of Latin American currencies advanced 1.3% and gauge of regional stocks gained 1.8%.
A closely watched U.S. showed only a moderate monthly rise in prices in November, with a measure of underlying inflation posting its smallest gain in six months.
That helped soothe some concerns over higher-for-longer interest rates after the Fed spooked markets by projecting a more cautious stance in 2025 earlier this week.
"While we and the Federal Reserve should absolutely view today's inflation data as marginally encouraging, the key word here is "marginally" relative to expectations," said Greg Wilensky, head of U.S. fixed income at Janus Henderson Investors.
"This inflation data is not enough to move the needle by itself to cause them not to pause at the January (meeting)."
Still, the change in the Fed's outlook puts emerging markets under more pressure at the year's end, with a rising U.S. dollar and Treasury yields weighing on foreign demand for EM assets, while the threat of tariffs from U.S. President-elect Trump's incoming administration looms.
MSCI's Latam stock index is set for a near 4% weekly loss, while the currency index was set for a flat week.
Brazil's real rose 1.3% against the dollar, continuing to recover after sinking to all-time lows earlier in the week, after the intervened yet again via a spot dollar auction with more scheduled later in the day.
"The plunge in the currency has been driven by a collapse in confidence in policymaking and the public finances," said William Jackson, chief emerging markets economist at Capital Economics.
Investors' worries about the country's fiscal sustainability have dented its markets in recent days. Brazil's approved a government-proposed fiscal package on Friday that includes measures to contain spending aimed at putting the country's finances on a more sustainable path.
Mexico's peso gained 1.3% a day after its central bank eased by an expected 25 bps, one of a bevy of EM central bank decisions this week ahead of the Christmas holiday.
Most Latin American stock indexes were steady or higher, with Argentina's Merval outperforming with a 1.6% gain.
Both MSCI's global emerging markets currency and stock indexes were set for their worst weekly performance in over a month.
HIGHLIGHTS
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Key Latin American stock indexes and currencies:
(Reporting by Lisa Mattackal and Shashwat Chauhan in Bengaluru; Editing by Franklin Paul)
((LisaPauline.Mattackal@thomsonreuters.com [LisaPauline.Mattackal@thomsonreuters.com]; Shashwat.Chauhan@thomsonreuters.com [Shashwat.Chauhan@thomsonreuters.com]))
