* Chilean c.bank sees below-neutral policy for next 2 years * Magazine Luiza leads Brazil stocks higher * Peruvian sol bucks gloom, up 0.4% on GDP rise * Rising commodity prices should boost Latam stocks, FX - Invesco (Updates prices) By Ambar Warrick and Susan Mathew July 15 (Reuters) - Chile"s peso looked set to post its worst session in two months on Thursday, leading losses across most Latin American currencies, as the country"s central bank indicated that monetary policy would remain loose for longer. The peso dropped 1.7%. The central bank hiked rates to 0.75% to stall inflation, but projected monetary policy to remain below neutral levels for the next two years. "A significant improvement in the COVID backdrop, above target headline and core inflation, and supportive external backdrop have reduced to a very significant extent the need for monetary policy to continue to support the recovery," Goldman Sachs analysts wrote in a note. They see Chile"s key rate between 1.5% to 1.75% by end-2021, while Credit Suisse sees it at 1.5%, lagging other regional peers that have adopted hawkish stances. MSCI"s index of Latin American currencies dropped 0.3%, underperforming a broader emerging markets index , as the dollar recovered from U.S. Federal Reserve Chairman Jerome Powell sticking to his dovish stance. Brazil"s real fell 0.9% after rising strongly in the previous session, while Mexico"s peso weakened 0.4%, coming under pressure from a recent spike in COVID-19 cases in the country. The Peruvian sol outperformed, up 0.4%, after the economy showed continued growth, rising 47.8% year-on-year in May, its third monthly advance after a series of contractions during a fresh wave of the coronavirus. Argentina"s inflation rate clocked in at 3.2% in June, still high but edging down from earlier in the year, data showed. Ten-year inflation linked bonds continued their move higher. The International Monetary Fund and Argentina are negotiating towards a new Extended Fund Facility program to deal with the South American country"s $45 billion debt to the Fund, it said on Thursday. While most Latin American bourses joined a sell-off in global equities, Mexico"s index posted its best day in more than three months, led by a 7% surge in copper producer Grupo Mexico that tracked the red metal"s prices higher. Brazil"s Magazine Luiza jumped nearly 5% after it said it would raise more funds and buy e-commerce company Kabum Comercio Eletronico for 1 billion reais ($196.53 million). Rising commodity prices and a strong outlook for the mining sector, especially given rising demand for "green metals" such as copper and cobalt, should boost Latin American stocks and currencies, potentially aided by a weaker dollar. Key Latin American stock indexes and currencies: Stock indexes Latest Daily % change MSCI Emerging Markets 1346.97 0.66 MSCI LatAm 2580.08 -0.89 Brazil Bovespa 127431.11 -0.76 Mexico IPC 50418.89 1.99 Chile IPSA 4155.09 -0.08 Argentina MerVal 63327.10 -0.988 Colombia COLCAP 1277.39 -0.55 Currencies Latest Daily % change Brazil real 5.1305 -0.91 Mexico peso 19.9766 -0.55 Chile peso 757.5 -1.74 Colombia peso 3812.02 -0.58 Peru sol 3.9369 0.42 Argentina peso 96.1800 -0.02 (interbank) (Reporting by Ambar Warrick; Editing by Sonya Hepinstall and Alex Richardson)