Latin American markets gain as investors brace for Fed call and weigh regional policy moves

Most Latin American equity markets rose on Wednesday, recovering from the prior session's declines, while regional currencies delivered a patchwork performance as global and domestic policy events held investors' attention.

Attention centered on the U.S. Federal Reserve, which was scheduled to announce its rate decision later in the day and was widely expected to keep borrowing costs steady at the first meeting chaired by Kevin Warsh. The dollar inched higher ahead of the announcement and could face swings as markets adjust to a new approach to policy and communication.

Geopolitical developments added to market uncertainty. Officials announced an interim U.S.-Iran peace agreement earlier in the week, but U.S. President Donald Trump said the deal was not final and cautioned he could resume bombing if he was not satisfied with the terms. That public ambivalence compounded investor unease amid limited details on the agreement.

FX strategist Francesco Pesole of ING warned that the dollar's path depends on the tone from the Fed. "The dollar can hold up if the Fed avoids sounding dovish, but the risk-reward has shifted somewhat against USD because falling energy prices reduce the need for further tightening," he said.

Market measures reflected the cautious optimism. The MSCI index tracking Latin American currencies rose 0.4%, while the MSCI Latin American equities index climbed 1.7%.

Regional central bank moves

Domestic policy actions continued to influence markets. Chile's central bank kept its benchmark rate at 4.5% on Tuesday for a fourth consecutive meeting, matching expectations as inflation eased slightly within the bank's target range. On Wednesday, that same central bank trimmed its 2026 growth outlook to a range of 1.0% to 1.75%, down from the 1.5% to 2.5% projection made in March, citing weaker-than-expected activity in the first quarter.

Chile's stock index was largely steady following the forecast revision, while the peso advanced 0.5%, on pace for a seventh consecutive session of gains - its longest streak since February 2025.

Brazil's central bank was slated to announce policy later on Wednesday and was expected to enact a third straight 25-basis-point rate cut as officials balance persistent inflationary pressures with a gradual easing from near two-decade high borrowing costs. In trading, Brazil's Bovespa index gained 1% and the real strengthened 0.6%.

Argentina's equities also moved higher, with the stock market up 0.8% on the day. On Tuesday, the World Bank Group approved a guarantee-backed financing package intended to mobilize up to $2 billion in commercial loans for Argentina to help lower financing costs and bolster public debt management.

Separately, an Inter-American Development Bank report indicated China was the fastest-growing buyer of Latin American and Caribbean goods in the first quarter of 2026, although the United States remained the region's largest market. Policymakers and exporters across the region have accelerated efforts to diversify destinations for their goods amid U.S. trade rhetoric and threats of higher tariffs.

Market snapshot - 1438 GMT

Overall, equities in the region showed resilience as investors balanced geopolitical uncertainty, evolving central bank guidance and country-specific policy developments.