The Atlanta Federal Reserve chief has noted that businesses are struggling more with higher tariffs, leading to uncertainty about future consumer spending. Despite these challenges, companies still expect a strong year, indicating that current Federal Reserve policies might not be too restrictive. However, we still need to assess the full effects of trade policies and other changes.

United States Employment Status

The U.S. is nearing full employment, which is an important economic signal. The Federal Reserve’s main goal remains price stability. A quarter-point rate cut is likely this year based on current economic conditions. This potential cut aims to help address emerging challenges. With the expected rate cut, we should focus on strategies that work well with stable, slightly lower rates by year-end. Markets currently predict over a 70% chance of a rate cut by the December 2025 meeting, indicating a cautious outlook. This suggests we should be careful about expecting a rapid easing cycle.

Inflation and Employment Data

There may be rising price pressures as businesses are unable to absorb the cost of higher tariffs. The latest Consumer Price Index data for August shows core inflation stuck at 2.9%, significantly over the target. This reinforces the idea that price stability is the top priority, limiting the Fed’s ability to cut rates. The job market remains strong, with the economy close to full employment. In August, the job report revealed 175,000 new jobs, keeping the unemployment rate low at 3.8%. This strength suggests that Fed policies are not too tight and that there’s less urgency for immediate rate cuts. The future of consumer spending remains uncertain, which brings some unpredictability for the months ahead. Retail sales in July were flat, a sharp decline from the strong spending seen in the spring of 2025. This uncertainty suggests using options strategies that could profit from increased volatility may be wise. Given the current situation, focusing on trading interest rate volatility seems like a smart move. We can consider options on Treasury futures, like long straddles, to take advantage of market responses to upcoming inflation or employment data. With the VIX around 14, a level we haven’t seen since early 2024, implied volatility appears to be relatively low. Create your live VT Markets account and start trading now.

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