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    Former Fed officials discussed unclear data and mixed business strategies before Powell’s speech.

    by VT Markets
    /
    Aug 23, 2025
    A former Fed official refers to the current economic situation as “stagflation light,” suggesting that the Fed chair will try to be flexible. While public pressure on the Fed chair seems unlikely, private pressure from the administration is often present. Another former Fed president notes that the economic data is confusing. Businesses have different approaches; some use data to plan, while others stay cautious. Views on the economy vary, and people interpret the data in different ways. The data is indeed unclear right now. The latest CPI reading for July shows inflation is still high at 3.4%, while the Q2 GDP growth was just revised down to a slow 1.1%. These mixed signals make it hard to predict the Fed’s next move. This uncertainty is creating divisions reflected in the markets. The VIX index, which measures expected volatility, has risen from summer lows near 15 to over 21 this week, indicating that traders are preparing for larger price shifts. It seems that owning volatility might be more profitable than picking a specific direction. With many businesses in a wait-and-see mode, the key factor will be the policy guidance from Chair Powell’s upcoming speech. Derivative traders might want to consider strategies like long straddles or strangles on major indexes. These strategies can profit from a significant price move in either direction after the speech. Although the premiums on these options are increasing, the potential payoff from a surprise in policy is considerable. We are experiencing “stagflation light,” reminiscent of the uncertain markets we faced in 2023. This is why CME FedWatch data indicates that the market is almost evenly divided, with a roughly 48% chance of another rate hike at the September meeting. The lack of a clear agreement in the market itself serves as a strong signal.

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