EMERGING MARKETS-Hot U.S. CPI data sends Latam stocks, FX crashing

* Brazil July services activity up 1.1%, beating expectations * Colombia government seeks further 2023 budget increase * Chile launches plan to address weakened economy * Argentina inflation seen easing back from July peak By Anisha Sircar and Amruta Khandekar Sept 13 (Reuters) - Latin American currencies plunged on Tuesday as the dollar surged after data showed monthly U.S consumer prices unexpectedly rose in August, fanning fears of aggressive rate hikes in the world's largest economy. The U.S. consumer price index gained 0.1% last month after being unchanged in July, the Labor Department said. Economists polled by Reuters had forecast a dip of 0.1%. All major currencies were in the red, with Colombia's peso , Mexico's peso and Chile's peso down more than 1% each. "We're at a point where inflation (in Latam) is starting to cool faster than U.S. inflation and that differential creates risks for those currencies," said Edward Al-Hussainy, senior analyst at Columbia Threadneedle. "Many Latam central banks are coming to the conclusion that they've broken inflation domestically, and therefore, their hiking cycles are likely to come to an end before the end of this year," added Al-Hussainy. "On the other hand, clearly the Federal Reserve hiking cycle isn't anywhere near done, so it creates a window for the dollar to strengthen again." The Fed is seen delivering a third straight 75-basis point rate hike next week, futures contracts tied to the Fed's policy rate showed. "When (the Fed) starts to telegraph the rate increases are near the end, you'll see (Latam) markets snap back into gear," said Robert Lutts, chief investment officer at Cabot Wealth Management. The dollar index pared earlier losses to jump 1.04% following the CPI data. Broader EM currencies reversed gains from earlier in the day to eye their worst day so far this month. Brazil's real led Latam losses, plunging 1.5%, looking past upbeat data that showed services activity in the country rose 1.1% in July from June, above the median 0.5% increase forecast in a Reuters poll. Regional stocks and currencies were set to snap a three-day winning streak as worries re-emerged over cost pressures and economic growth amid rising fears of a recession. On Monday, Chile's government launched a plan to promote investment into 2023 that includes an array of tax breaks for the world's largest copper producer at a time when its economy is faltering. Elsewhere, Colombia's government wants to expand its budget for 2023 by 14.3 trillion pesos ($3.28 billion), a finance ministry spokesperson said. Ecopetrol inched 0.1% higher. The Colombian state-run oil company asked the oil regulator to suspend contracts for two fracking pilot projects for 90 days, the firm and two sources told Reuters. Meanwhile, Argentina's inflation rate, heading towards 100% this year, likely eased in August versus a 20-year peak the month before, analysts polled by Reuters said. Key Latin American stock indexes and currencies at 1441 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 978.59 -0.05 MSCI LatAm 2207.06 -1.53 Brazil Bovespa 112531.66 -0.77 Mexico IPC 47781.45 -0.17 Chile IPSA 5623.86 0.49 Argentina MerVal 145682.47 0.669 Colombia COLCAP 1238.96 0.28 Currencies Latest Daily % change Brazil real 5.1645 -1.33 Mexico peso 20.0628 -1.21 Chile peso 912.5 -1.59 Colombia peso 4415.95 -1.40 Peru sol 3.8521 -0.28 Argentina peso 142.5700 -0.20 (interbank) Argentina peso 268 1.49 (parallel) (Reporting by Anisha Sircar and Amruta Khandekar in Bengaluru Editing by Marguerita Choy)