A $300 billion spending package and rising core PCE pressure the Fed as traders split on rate cuts or hikes ahead of key deadlines.
A $300 billion fiscal package set for September threatens to disrupt the Federal Reserve’s 200-day rate pause, with core PCE at its 90th percentile. The Fed has held rates at 3.75% since December 11, 2025, but inflation continues to climb monthly, complicating policy decisions.
Traders remain divided, with some expecting a July hike while others anticipate 50bps in cuts. Goldman Sachs leans toward easing, but inflation hawks argue for tighter policy. The VIX sits in its 22nd percentile, signaling historically cheap options protection ahead of tariff deadlines and fiscal battles.
Uncertainty dominates as investors weigh conflicting signals from jobs data, geopolitical risks, and the looming fiscal package. The Fed’s next move hinges on whether inflation or growth concerns prevail in the coming months.