Federal Reserve Governor Lisa Cook spoke about the economic outlook and monetary policy at the Brookings Institution. She mentioned that the Fed’s recent interest rate cut was necessary because of risks in the job market. While the government shutdown is impacting the economy, growth is expected to return. Cook highlighted the importance of each US central bank meeting for deciding on monetary policy, as there is no set course. She described the current policy as moderately restrictive, aimed at reducing inflation. The goal is to bring inflation back to the target of 2%, even with the pressures caused by tariffs.

Monitoring The Labour Market

It’s crucial to keep an eye on the labor market for any signs of trouble, especially since inflation is high and could rise further. Cook is paying close attention to inflation expectations, watching how tariffs affect businesses and families. Recent data shows a slowdown in hiring, stressing the need for prompt rate decisions. The US Dollar’s performance against major currencies was discussed, with its strength particularly noticeable against the Swiss Franc. In related news, Agustin Wazne has joined FXStreet as a Junior News Editor, focusing on commodities and major markets. Legal information pointed out investment risks and clarified the non-advisory nature of the content. The Federal Reserve seems conflicted, which creates a valuable environment for trading volatility. The recent 25 basis point interest rate cut in October 2025 signals concerns about the job market, but their statements indicate they are not ready to declare victory over inflation. This tension suggests we shouldn’t expect a straightforward path for monetary policy in the near future. A significant concern is the labor market, which could decline rapidly. The unemployment rate has risen from 3.9% earlier this year to 4.2% last quarter, catching the Fed’s attention. This trend supports predictions for additional rate cuts, which could be reflected in options on interest rate futures ahead of the December meeting.

Inflation Concerns Remain

Inflation, however, continues to be a serious issue. The latest Core PCE reading was 2.8%, still above the 2% target and a reminder of the inflation spike from 2022 and 2023. This risk means the Fed might keep rates steady or take a more aggressive stance if upcoming price data is high. This uncertainty is evident in the market’s fear gauge. The VIX index, which tracks expected volatility in the S&P 500, has risen from the mid-teens to around 20. This increase shows that investors are ready for larger price swings, indicating strategies like buying straddles or strangles on major indices could be profitable, as they benefit from significant movements either way. The current strength of the US dollar complicates matters further. Its 0.36% rise against the Swiss Franc today suggests the market still expects some policy restriction from the Fed, despite the recent rate cut. This offers opportunities for currency traders, particularly if a weak jobs report leads to a sharp reversal in the dollar’s value. As a result, traders should prepare for swift reactions to incoming data, particularly the November employment report and the next CPI inflation figures. Options on short-term Treasury notes, like the 2-year, will be highly sensitive to any news that could affect the Fed’s December decision. The key is to trade the uncertainty itself, as the Fed has shown that its next move is not set in stone. Create your live VT Markets account and start trading now.

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