A DC Circuit appeals court has reinstated Rebecca Slaughter to the Federal Trade Commission with a 2 to 1 vote, despite attempts to remove her without explanation. This decision could strengthen Federal Reserve Chair Powell’s position, providing him with increased job security. His current term is set to end in May 2026.

Impact of the Court Decision

The court’s ruling to restore an FTC commissioner acts as a check on executive power. This lowers the immediate political risk for Fed Chair Powell and increases the chances that he will complete his full term until May 2026. This stability is important as we face a challenging economic environment. The bond market has shown implied volatility, as measured by the MOVE index, hovering around 125 amid speculation about a leadership change at the Fed. Now, that political risk should start to ease. This comes even as the latest inflation data from August 2025 shows core prices remaining steady at 3.2%, keeping the Fed’s data-driven approach intact. For derivative traders, this means the direction of monetary policy will likely be more predictable and less influenced by politics. We expect the market to lower the small chance of an aggressive, politically-driven rate cut before the end of 2025. As a result, selling short-dated options on SOFR or Fed Funds futures that rely on a surprise cut may be less appealing.

Market Implications

A more stable Fed outlook is likely to reduce volatility in equity markets. With the VIX index recently reaching 19 due to policy concerns, we see a chance to profit by selling options, such as VIX calls or iron condors on the SPX. In late 2018, when the administration and the Fed reached a perceived truce, volatility sharply decreased. The likelihood of Powell’s continuation means the Fed will maintain its commitment to combating inflation based on economic data rather than political pressures. Therefore, options strategies anticipating a consistently hawkish Fed might be beneficial. This approach could involve preparing for rates to stay higher for an extended period, more than some in the market currently expect. Create your live VT Markets account and start trading now.

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