In June 2025, the core Personal Consumption Expenditures (PCE) in the U.S. rose to 2.8% year-over-year, slightly above the expected 2.7%. Month-over-month, the PCE increased by 0.3%, which matched forecasts. PCE prices, excluding food, energy, and housing, also rose by 0.3%, and services without energy and shelter saw a 0.2% increase compared to the previous month. The overall PCE figures showed a year-over-year increase of 2.6%, slightly ahead of the anticipated 2.5%. The month-over-month rise was in line with predictions at 0.3%, based on an unrounded PCE figure of 0.2805%, which rounded to 0.3%.

Personal Income And Expenditures

Personal income grew by 0.3%, or $71.4 billion, rebounding from a decline of 0.4% the month before. Personal consumption expenditures rose by $69.9 billion (0.3%), although actual consumption only increased by 0.1%, following a revised figure of -0.2% from last month. Total personal outlays surged by $69.5 billion, keeping the personal saving rate steady at 4.5%, which amounts to $1.01 trillion in total savings. Meanwhile, major stock indices have made gains, with the Dow Industrial average rising by 118 points, the S&P index up by 62 points, and the NASDAQ increasing by 120 points. The latest Personal Consumption Expenditures (PCE) data presents a mixed picture. Inflation remains stubborn, with the core year-over-year figure at 2.8%, slightly higher than the 2.7% that was anticipated. Consumer spending appears weak, up only 0.1% for the month. These mixed signals put the Federal Reserve in a tough situation, and traders should expect more uncertainty. The market has been hoping for the Fed to indicate a start to rate cuts after keeping rates steady at 5.25% for over a year. However, ongoing inflation makes immediate cuts less likely. After the report, the CME FedWatch tool shows the probability of a rate cut at the September meeting has dropped below 40%.

Market Volatility And Trading Strategies

For traders in derivatives, this suggests increased volatility over the coming weeks. The VIX, which measures expected stock market volatility, has been hovering just above 18, and it’s expected to stay high or even rise around future data releases. In this environment, buying options like straddles or strangles on major indices such as the S&P 500 could be a smart strategy to prepare for significant market moves in either direction. We’re also noticing personal income rising faster than spending, leading to a personal savings rate of 4.5%. This indicates that consumers are cautious despite having the capacity to spend, a trend also shown in the recent Q2 GDP estimate, which indicated growth slowing to 1.8%. This underlying weakness suggests that buying put options on indices or specific consumer-discretionary stocks may be a wise hedge. Looking back, this situation resembles the volatile markets from 2023 and 2024. During that time, each inflation report caused big intraday swings as traders adjusted based on changing Fed expectations. We should be ready for a similar pattern through August 2025, with sharp reactions to employment and manufacturing data. As a result, traders should pay attention to interest rate derivatives, as the direction of Treasury yields has become less clear. Options on Treasury futures are likely to see increased activity as the market weighs whether persistent inflation or slowing growth will catch the Fed’s attention. Employing defined-risk strategies like iron condors could be effective in a range-bound Treasury market until a clearer trend emerges. Create your live VT Markets account and start trading now.

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