Pantheon Macroeconomics predicts that the upcoming CPI data will show a 0.23% increase in core PCE. Similar trends are expected in the PPI data. Despite the latest CPI figures, market expectations for easing from the Federal Reserve have not changed much, and there is still strong belief that a rate cut is coming. According to The Wall Street Journal, the CPI report could influence a rate cut in September. However, the July data wasn’t strong enough to block it. There are growing concerns about the reliability of economic data, especially after major revisions to U.S. employment numbers.

US Economic Data Concerns

Fed Chair Powell once viewed U.S. economic data as the best in the world, but recent events have raised questions. In response, President Trump has nominated E.J. Antoni, a critic of the Bureau of Labor Statistics, to lead the agency. This comes after the dismissal of Commissioner Erika McEntarfer, when revised job growth figures for May and June revealed an overestimate of 258,000 jobs, a change that received widespread criticism. Trump’s nomination appears to be an effort to place allies in important roles that influence economic data. The July CPI report leaves the door open for the Federal Reserve to consider cutting rates. The CME FedWatch tool shows about a 75% chance of a 25-basis-point cut at the September meeting, despite inflation remaining above the Fed’s 2% target. The main concern is the growing lack of trust in economic data. The large downward revision of 258,000 jobs for May and June 2025 has made relying on initial figures risky. This was one of the biggest revisions lately and has shaken confidence in the reports. This uncertainty is also affected by politics, as a known critic heads the Bureau of Labor Statistics. Consequently, we must account for political risks with every major data release about jobs and inflation. Markets will likely analyze the methods used to collect data and expect revisions more than ever.

Market Strategy Amid Data Skepticism

We’ve seen skepticism regarding data in the past, like the major annual revisions to payroll data in early 2023. Back then, the market reacted with sharp volatility as it adjusted economic expectations. We expect a similar but more prolonged pattern of uncertainty in the next months. Given this situation, holding onto volatility seems wise. We should consider buying options that could benefit from significant price movements, regardless of direction, especially around important data releases like the upcoming PPI report and the September FOMC meeting. Implied volatility on interest rate-sensitive ETFs like TLT is likely to rise. Rather than making simple bets on falling rates, traders might want to explore strategies like straddles or strangles. These could yield profits from significant market reactions to the economic data, whether the results are surprisingly high or low. Using puts to hedge existing portfolios on major indices is also becoming increasingly important. All eyes will be on tomorrow’s Producer Price Index (PPI) and the core PCE data later this month. These reports will test the market’s confidence in official statistics in this new politically charged atmosphere. We expect any deviation from expected outcomes to trigger strong market reactions. Create your live VT Markets account and start trading now.

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