EMERGING MARKETS-Brazilian real drops, South African rand sinks despite rate hike

* Brazil consumer prices rise less than expected * South Africa hikes rates, rand at record low * Turkey central bank holds interest rates By Amruta Khandekar and Siddarth S May 25 (Reuters) - Latin American currencies were knocked by a drop in the Brazilian real on Thursday, while the rand hit a record low as uncertainty over a U.S. debt ceiling deal eclipsed a super-sized South African interest rate hike. The real fell 1% against the dollar after data showed consumer prices in Brazil rose 0.51% in the month to mid-May, down from the previous month and below forecasts of 0.64%. Brazil's inflation slowdown is likely to put more pressure on its central bank to lower interest rates. "Inflation in Brazil has come down pretty quickly. Underlying inflation may not be as low, but it's still come down quicker than in most countries and the policy rate is still among the highest of the major emerging markets," said Kieran Curtis, head of emerging market local currency debt at Abrdn. Chile's peso hit a fresh one-month low and was down for the third straight session, despite higher copper prices. Meanwhile, oil exporter Mexico's peso was down 0.2%, tracking a steep fall in crude prices. Mexico posted a $2,965 million trade deficit in April when adjusted for seasonal swings, the central American country's national statistics agency said on Thursday. MSCI's Latin American currencies index was down 0.7% while stocks fell 0.2%, though Brazil's Bovespa index climbed 1.1%, limiting declines. Broader EM stocks were pressured by mounting Sino-U.S. trade tensions and the absence of an agreement over raising the U.S. debt ceiling, although top congressional Republican Kevin McCarthy said some progress has been made in talks. The rand fell to an all-time low against the dollar and was last down 2.3% after South Africa's central bank raised its key interest rates by 50 basis points (bps) to 8.25%. Analysts pointed to fears of a U.S. default and concerns such as geopolitical risk as among factors weighing on the rand. "The 50bp rate hike was largely in line with market expectations, and therefore by itself seems to not have been enough in the near term to stem the recent weakness in the rand," said James Wilson, EM sovereign strategist at ING. "The worsening growth outlook due to persistent power cuts and recent increase in geopolitical tensions are clear concerns for the market, while USD strength is an additional global factor," Wilson said. Elsewhere, Turkey's central bank kept its policy rate at 8.5% as expected, holding steady for a third straight month, despite a market rout after the first round of elections which indicated President Tayyip Erdogan was poised to win a runoff. Emerging economies will continue to suffer from the spillover of economic problems in the U.S., which are restricting their market access and pushing up financing costs, a Moody's report said on Thursday. Key Latin American stock indexes and currencies at 1432 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 963.15 -0.8 MSCI LatAm 2260.83 -0.26 Brazil Bovespa 110116.77 1.21 Mexico IPC 53180.16 -0.4 Chile IPSA 5638.30 -0.09 Colombia COLCAP 1103.82 -0.62 Currencies Latest Daily % change Brazil real 5.0071 -1.08 Mexico peso 17.8443 -0.28 Chile peso 810.8 -0.48 Colombia peso 4432.86 0.07 Peru sol 3.6963 -0.84 Argentina peso 235.7000 -0.32 (interbank) Argentina peso 488 0.82 (parallel) (Reporting by Siddarth S in Bengaluru; Editing by Alexander Smith)