Chicago Federal Reserve Bank President Austan Goolsbee remains hesitant about endorsing a September interest rate cut. He mentioned that the Fed’s autumn meetings will be conducted live, acknowledging that while some job market data looks stable, other information flags possible concerns.

Goolsbee stressed that a rate cut would be necessary if the labour market begins to weaken, though he is uncertain whether this trend has started. He expressed the need for several months of positive inflation data before considering a rate cut, highlighting recent mild inflation figures overshadowed by a rise in services inflation.

Tariffs And Economic Factors

He discussed the complexities regarding tariffs, particularly on semiconductors, noting that these are not simply a one-time inflationary shock. Goolsbee noted that economic factors could naturally lead to lower interest rates but stressed the potential to preemptively cut rates if inflation appears likely to hit 2%.

Although Goolsbee, regarded as one of the more dovish members of the FOMC, is cautious about a September rate cut, he indicated the decision could change based on new data before the meeting. Anticipation regarding the forthcoming gathering remains high.

With even the more dovish voices on the Federal Open Market Committee now signaling hesitation for a September rate cut, we see a clear increase in uncertainty. The market is repricing expectations quickly, with the implied probability of a September cut dropping from over 70% just last month to around 45% as of today. This “live meeting” stance means volatility will likely define trading in the coming weeks.

Given this environment, buying options to prepare for price swings is a prudent strategy. We are looking at VIX call options or long straddles on major indices like the SPX, which could profit from the heightened market choppiness expected around the next inflation and jobs reports. This approach is a direct play on the Fed’s current indecisiveness.

Higher For Longer View

The concern over services inflation, which we saw accelerate to a 4.1% annual rate in the July 2025 CPI report despite a cooling headline number, supports a “higher for longer” view. Therefore, we are considering selling short-term interest rate futures, such as those tied to SOFR, to position for the Fed holding rates steady in September. This benefits if a cut is delayed further than the market had previously priced in.

Mixed signals in the labor market are also a key risk for equities. While the July non-farm payroll report showed a solid 210,000 new jobs, the unemployment rate ticked up to 4.2%, and initial jobless claims have been trending up for six consecutive weeks. Buying protective put options on the Nasdaq 100 (NDX) offers a valuable hedge against a potential downturn if this labor market weakness becomes more apparent.

We remember a similar situation in late 2023, when the market aggressively priced in rate cuts for early 2024 that the Fed was not yet prepared to deliver. That period led to a sharp rise in bond yields and a volatile stock market as traders were forced to adjust. This historical precedent suggests we should be cautious and avoid betting too heavily on an imminent pivot from the Fed.

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