* Mexican c.bank raises overnight rates by 25 bps * Brazil cenbank ups 2021 GDP growth forecast to 4.6% * MSCI update on Argentina in focus (Adds comments, updates prices throughout) By Shreyashi Sanyal and Ambar Warrick June 24 (Reuters) - Mexico"s peso jumped on Thursday, leading gains among its Latin American counterparts, after the country"s central bank unexpectedly raised its benchmark interest rate, while a flat dollar on middling U.S. labor data also buoyed currencies. The peso rose 1.7% to a two-week high as the Mexican central bank, commonly known as Banxico, raised its benchmark lending rate by 25 basis points to 4.25% to protect from the adverse effects on inflation expectations. The decision follows a hawkish tilt from the U.S. Federal Reserve last week, which signaled higher rates could come sooner than previously planned. "The surprise 25bp rate hike by Banxico suggests that its reaction function is not as dovish as we had thought, with most Board members increasingly worried about the inflation outlook," said Nikhil Sanghani, Latin America economist at Capital Economics. "With the core rate set to remain above target over the coming months, this hawkish shift suggests that some further tightening over the rest of the year is likely." Data on Thursday showed consumer prices in the first half of June rose more than expected, while a separate reading showed Mexico"s jobless rate declined in May. Ratings agency S&P raised its forecasts for Mexican economic growth to 5.8% for this year and 2.9% in 2022, saying Mexico was benefiting from a strong U.S. economic recovery, via manufacturing exports and remittances. While the peso had benefited from relatively higher rates at the start of the year, hikes in regional peer Brazil, as well as a cut in Mexican lending rates in February, have diminished the peso"s appeal for carry trade. Brazil"s real rose 1.2% as the country"s central bank raised its economic growth outlook for this year to 4.6% from 3.6%, closer to the broader market consensus. Sentiment toward emerging markets improved after U.S. weekly jobless claims fell much less than expected, while new orders for U.S.-made capital goods unexpectedly fell in May. The data eased some fears over imminent policy tightening by the Fed, given that the labor market is a major factor for the bank to consider halting its massive stimulus program. Latam stocks also rose, with MSCI"s index of regional stocks rising 1.7%, outpacing the broader emerging market index. Focus was also on Argentine markets, with index provider MSCI expected to provide an update after the U.S. market close on whether Argentina can remain part of its benchmark emerging market index. If not, the country"s assets will face relegation to frontier markets or standalone status. Ejection from the MSCI emerging market index could also result in outflows of $610 million from Argentinian stocks, JPMorgan calculated. Key Latin American stock indexes and currencies at 1933 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1368.33 0.58 MSCI LatAm 2693.76 1.7 Brazil Bovespa 129205.35 0.61 Mexico IPC 50499.86 0.66 Chile IPSA 4415.86 1.04 Argentina MerVal 67058.44 1.465 Colombia COLCAP 1280.62 2.7 Currencies Latest Daily % change Brazil real 4.9047 1.19 Mexico peso 19.8890 1.39 Chile peso 734.3 0.10 Colombia peso 3763.25 0.47 Peru sol 3.9838 -0.13 Argentina peso (interbank) 95.5500 -0.01 Argentina peso (parallel) 167 -0.60 (Reporting by Ambar Warrick and Shreyashi Sanyal; Editing by Dan Grebler and Nick Zieminski) Our Standards: The Thomson Reuters Trust Principles.