How can I print the translated entity title in a template?
If you configure the reference field to display the entity title it should be translated automatically, as @leymannx commented. But if you get the title from the entity directly you have to make sure the entity is in the correct language. If you don't want to use PHP you can do this with the help of Twig Tweak:
{{ item.entity|translation.title.value }}

See https://git.drupalcode.org/project/twig_tweak/-/blob/3.x/docs/cheat-sheet.md#entity-translation