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EMERGING MARKETS-Brazil short-term rate future yields slip awaiting c.bank decision

decision@ SAO PAULO, July 24 (Reuters) - Yields on short-term Brazilian interest rate futures slipped on Monday on bets that the central bank will cut rates aggressively this week despite signaling that it could slow the pace of easing. Several economists last week revised their forecasts for Brazil's benchmark Selic rate to account for a faster-than-expected drop in inflation as a slow economic recovery kept a lid on prices. JPMorgan now expects the central bank to cut rates by 100 basis points when it announces its decision on Wednesday to 9.25 percent, with the benchmark rate hitting 8 percent by October. In its last policy statement, the bank warned it could slow the pace of cuts from a current 100 basis points per meeting due to growing political turmoil, driving many investors to bet on a smaller 75 basis-point reduction in July. Those bets lost steam after Congress approved a revamp of the country's labor laws by a wide margin, suggesting resilient lawmaker support for President Michel Temer's reform platform despite corruption allegations against him. Analysts and traders said the future path of interest rates will hinge on the approval of other reforms needed to curb growth of public debt. "It is yet to be seen how the central bank will approach the pension reform paralysis," CM Capital Markets economist Camila Abdelmalack said, referring to successive delays to Temer's plans to streamline the country's social security system. Reforms are also key to extend the Brazilian real's rally as it looks set to post the biggest gain among Latin American currencies this month, traders said. The currency seesawed on Monday, hovering near 3.15 reais to the greenback. In a Monday note to clients, strategists at BNP Paribas recommended clients purchase the real, betting that it will breach the 3.00 threshold by the end of the year. Most other Latin American currencies weakened, struggling to extend this month's gains following stronger-than-expected U.S. manufacturing and services data. The Mexican peso slipped 0.8 percent, while the Chilean peso traded nearly flat, finding support in higher copper prices. Emerging market currencies mostly firmed in July as a batch of weak U.S. economic figures boosted bets that the U.S. Federal Reserve will raise rates at a slower pace than expected, fostering demand for risky assets.

Key Latin American stock indexes and currencies at 1640 GMT:

Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 1059.69 0.03 22.86 MSCI LatAm 2731.91 -0.14 16.88 Brazil Bovespa 64671.04 -0.41 7.38 Mexico S&P/BVM IPC 51576.80 0.85 13.00 Chile IPSA 5032.94 -0.04 21.24 Chile IGPA 25135.79 -0.05 21.23 Argentina MerVal 21619.14 0.72 27.79 Colombia IGBC 10868.65 -0.11 7.31 Venezuela IBC 132529.27 0.92 318.00 Currencies daily % YTD % change change

Latest

Brazil real 3.1359 -0.31 3.61 Mexico peso 17.6220 -0.78 17.72 Chile peso 651.5 0.02 2.95 Colombia peso 3011 -0.50 -0.32 Peru sol 3.249 -0.25 5.08 Argentina peso (interbank) 17.4000 -1.03 -8.76 Argentina peso (parallel) 17.9 -0.34 -6.03

(Reporting by Bruno Federowski; Additional reporting by Claudia Violante; Editing by Tom Brown)