Musalem indicated that the current policy is appropriate for tackling inflation in a full-employment economy but might require changes if job market risks intensify. He stated that his choice will rely on fresh data until the meeting, particularly including August’s employment report.<\/p>\n
Contrasting with Fed Chair Powell’s earlier suggestion that a cut might be justified as tariff-related inflation diminishes and labour risks rise, Musalem\u2019s remarks highlighted hesitation among some policymakers to ease given inflation above target. The FOMC is set to reconvene on September 16-17.<\/p>\n
With the September 16-17 FOMC meeting just weeks away, we are seeing a clear split in opinion within the Federal Reserve. This difference between a cautious stance and a more dovish one creates significant uncertainty for the market. As a result, the upcoming August jobs report is now the single most important catalyst for our short-term interest rate expectations.<\/p>\n
The data supports this cautious view, making a September rate cut less of a certainty than some might think. The last core CPI reading for July 2025 came in at 2.8%, validating the concern that inflation remains stubbornly above the 2% target. Furthermore, with the July jobs report showing a healthy gain of 195,000 jobs and unemployment at a low 3.7%, the argument for an imminent cut to support the labor market is weak.<\/p>\n
Given this data-dependent environment, we should anticipate a rise in market volatility. The VIX index, currently hovering near 14, seems low considering the potential for a market-moving surprise at the next meeting. We could look at purchasing options, such as straddles or strangles, on major indices to profit from a large price swing in either direction following the jobs data or the Fed’s decision.<\/p>\n
For those wanting to place a directional bet, Fed Funds futures are pricing in roughly a 60% chance of a 25-basis point cut in September. A strong jobs report in early September would likely cause that probability to fall sharply, presenting an opportunity to short those contracts. Conversely, a surprisingly weak report would solidify the case for a cut and send them higher.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" St. Louis Fed\u2019s Musalem urges patience on rate cut, citing persistent inflation and pending employment data.<\/p>\n","protected":false},"author":62,"featured_media":17024,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-29508","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t