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EMERGING MARKETS-Short-term Brazil rate futures slip after central bank report

report@ SAO PAULO, June 22 (Reuters) - Yields paid on Brazilian short-term interest rate future contracts slipped on Thursday as traders slightly increased bets on a steep rate cut after the central bank cut its forecasts for inflation. In a quarterly report, the bank lowered its inflation outlook to 3.8 percent from 4.0 percent for 2017 and to 4.5 percent from 4.6 percent for 2018. But it reiterated that the next policy decisions still depend on incoming economic data, signaling it was unsure whether to slow monetary easing from the brisk 100 basis-point current pace of rate cuts. Rate-future yield prices showed an increased likelihood that the central bank will lower the benchmark Selic rate by 100 basis points to 9.25 percent next month, although a majority of traders still bet on a slower 75-basis-point reduction.

Concerns that a mounting political crisis could delay the implementation of structural reforms have led the central bank to adopt a cautious stand. Those concerns helped to keep the Brazilian real flat, while most other Latin American currencies strengthened on the back of rising prices of crude and other commodities. Brazil's benchmark Bovespa stock index rose 0.8 percent, supported by shares of iron ore miner Vale SA and state-controlled oil company Petróleo Brasileiro SA . Shares of Cia Energética de Minas Gerais, Brazil's No. 3 power utility, led the gains after it kick-started the sale of its controlling stake in Light SA to cut debt. Shares of Light, which are not part of the Bovespa index, soared more than 25 percent, its biggest daily gain in more than two decades. Argentina's Merval stock index rose 1.8 percent, rebounding from its biggest daily loss in a year and a half following a decision by MSCI not to include the country in its emerging market index.

Key Latin American stock indexes and currencies at 1520 GMT:

Stock indexes daily % YTD % change change

Latest

MSCI Emerging Markets 1009.29 0.28 16.72 MSCI LatAm 2487.63 0.3 5.96 Brazil Bovespa 61229.01 0.77 1.66 Mexico S&P/BVM IPC 48917.23 -0.14 7.17 Chile IPSA 4751.31 -0.02 14.45 Chile IGPA 23818.16 0 14.87 Argentina MerVal 20980.24 1.77 24.01 Colombia IGBC 10656.78 -0.08 5.22 Venezuela IBC 120957.1 -0.38 281.51

3

Currencies daily % YTD % change change

Latest

Brazil real 3.3325 -0.02 -2.50 Mexico peso 18.1180 0.63 14.49 Chile peso 663.16 0.31 1.14 Colombia peso 3032.4 0.82 -1.02 Peru sol 3.267 0.12 4.50 Argentina peso (interbank) 16.2000 0.22 -2.01 Argentina peso (parallel) 16.58 0.72 1.45

(Reporting by Bruno Federowski; Editing by Lisa Von Ahn)