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    Barkin expects a small interest rate adjustment with minimal economic changes ahead

    by VT Markets
    /
    Aug 26, 2025
    Fed’s Barkin has shared his outlook for the next few months. He expects a slight change in interest rates, as he believes economic activity will stay relatively stable for the rest of the year.

    Expectations for Economic Activity

    Given the prediction of a slight interest rate change, traders in derivatives should prepare for lower volatility in the weeks ahead. The CBOE Volatility Index (VIX) is currently low at around 14, indicating that markets expect stability rather than shocks. This means that making big bets might not be as profitable as using strategies that take advantage of price movements staying within a certain range. The forecast for minimal economic changes is backed by recent data showing steady but not remarkable growth. For example, reports from July 2025 reveal that core inflation is at a manageable 2.7% and the second-quarter GDP growth remains at 2.1%. This stable environment gives the Federal Reserve little reason to take drastic actions, supporting the idea of a calm market. With this outlook, selling options premium seems like a smart strategy. Techniques such as iron condors or credit spreads on major indices like the SPX could work well, as they benefit from time decay and a lack of significant price changes. The aim is to collect premium while the market considers the chance of only a small rate adjustment. This situation feels very different from the market conditions we faced in 2022 and 2023. During that time, aggressive rate hikes in response to high inflation led to huge volatility, making it a better environment for buying options and following trends. Today’s calmer economic situation calls for a new approach that supports premium sellers.

    Remaining Cautious Amidst Potential Volatility

    However, we must stay alert to unexpected data reports that could disturb this low-volatility environment. A sudden rise in the August inflation report or weak job numbers could quickly change market sentiment and increase volatility. Therefore, it’s essential to maintain defined-risk positions to safeguard against abrupt market changes. Create your live VT Markets account and start trading now.

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