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* Brazil central bank set to hike rates to 5.25% * Peruvian sol, stocks slump * Brazil services PMI surges in July (Adds details, graphic, updates prices) By Susan Mathew and Ambar Warrick Aug 4 (Reuters) - Brazil's real was flat on Wednesday in anticipation of a 100 basis-point interest rate hike, while Peru's sol came close to record lows as investors fretted over the direction of fiscal policy under new President Pedro Castillo. The real pared early gains ahead of what is expected to be a fourth straight rise in the Selic rate, to 5.25%, aimed at preventing this year's runaway inflation from spilling over into 2022. The decision is due at 2100 GMT. Inflation in Brazil is well over 8% - more than double the central bank's official 2021 goal. A hawkish central bank has helped the currency cut losses made on worries over the coronavirus pandemic as well as political tensions that are expected to intensify leading up to elections next year. But the continued uncertainty about the pandemic may cause the central bank to not tighten after this hike, said Alexandra Bechtel, an EM and FX analyst at Commerzbank. Analysts at Credit Suisse expect the monetary authority to emphasize that there is no commitment to any terminal level and that its only objective is the inflation target. "The document is likely to remove the assessment that the inflation shock is temporary." PMIs on Wednesday showed activity in Brazil's services sector expanded at the fastest pace in 8-1/2 years in July. Peru's sol fell nearly 1% to 4.0798 to the dollar, coming close to a record low of 4.0844 as uncertainty over fiscal policy in the country persisted. While Castillo recently named moderate economist Pedro Francke as finance minister, investors are worried over increased taxes on the country's major copper mining sector. Peruvian stocks sank 0.6% to an eight-month low. In the United States, the Institute for Supply Management said U.S. services industry activity jumped to a record high in July, helping the dollar cut losses after data showed U.S. private payrolls increased far less than expected in July. This weighed on most emerging market currencies. Mexico's peso dropped 0.5% as oil prices slumped, while a rise in local COVID-19 cases also spurred a risk-off sentiment. Most regional stocks tracked Wall Street lower, with Brazil's second-biggest lender, Banco Bradesco, falling 3.6% as the lender's insurance unit took a hit from COVID-19 related claims in the second quarter. Colombian oil major Ecopetrol fell 2.6%, in line with oil prices, despite second-quarter net profit soaring to 3.72 trillion pesos ($951 million). Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1304.36 0.79 MSCI LatAm 2501.35 -0.22 Brazil Bovespa 122080.35 -1.21 Mexico IPC 51066.80 -1.1 Chile IPSA 4200.96 -0.14 Argentina MerVal 65126.97 -1.133 Colombia COLCAP 1240.45 0.4 Currencies Latest Daily % change Brazil real 5.1855 0.07 Mexico peso 19.9662 -0.48 Chile peso 774.29 0.14 Colombia peso 3902.36 0.09 Peru sol 4.0798 -0.96 Argentina peso 96.8300 -0.02 (interbank) (Reporting by Susan Mathew in Bengaluru; Editing by Steve Orlofsky and Leslie Adler)