By Felipe Barragán, Expert Research Strategist at Pepperstone
September 12, 2025 :
“Inflation in the US came as no surprise, but it did leave signs that the markets cannot ignore. The overall figure rose 2.9% annually and the core figure remained at 3.1%, exactly in line with expectations. However, beneath the surface, there are nuances: core goods inflation accelerated to 1.5% annually, its fastest pace since mid-2023, confirming that tariff effects continue to put pressure on prices. In any case, the Fed has not yet won the battle, as inflation is still above the 2% target.
The other key data point was initial jobless claims, which surprised on the upside. Although part of the variation can be explained by seasonal effects after Labor Day, the trend is clear: the labor market is cooling. The combination of stable but still high inflation and weaker employment is the perfect cocktail for the Fed to cut rates in September. The market already takes this for granted and, moreover, is beginning to discount a more aggressive cycle of cuts towards the end of the year.
The reaction was immediate: interest rates fell by 2–3bp across the curve, reflecting a shift toward a lower rate environment. Europe, in contrast, showed the other side of the coin: the ECB hinted that it had reached the end of its cycle of cuts, boosting the euro and widening the rate differential with the US. This divergence in monetary policy extends to emerging market currencies, where the “LatAm beta” shone once again. Even with commodities in decline, the COP, CLP, Brazilian real, and Mexican peso appreciated, showing that the flow toward carry and rate differentials is still alive.
In short, the coming days will be marked by a market that has already bought into the “September cut” and is looking to position itself in a higher beta environment, making LatAm an attractive tactical trade. Looking ahead to next week, the Fed meeting will undoubtedly be key in determining the direction of the markets.”