During a confirmation hearing, Stephen Miran said that no one from the Trump administration has asked him to lower interest rates. He also noted that he plans to take a temporary leave instead of resigning from the President’s Council of Economic Advisors since his term ends in January. Republican Senator Mike Rounds was surprised by Miran’s choice to stay in his White House role briefly instead of moving to the Federal Reserve. Nevertheless, he indicated that this wouldn’t affect his support for Miran’s nomination.

Significance of Miran’s Nomination

Stephen Miran’s nomination to the Fed board is important. His unique choice to take a “leave” from the White House raises questions about the Fed’s independence. The strong rate hikes in 2022 and 2023 were vital in controlling inflation, so any sign of political influence complicates future Fed actions. Traders need to adjust their forecasts to consider a higher chance of decisions based on politics. This situation conflicts with recent economic data, which doesn’t strongly indicate a need for rate cuts. For example, the August 2025 jobs report showed solid wage growth of 4.1% year-over-year, and core PCE inflation remains steady at 2.7%. Despite this, the market has reacted, with the probabilities for a rate cut at the November FOMC meeting rising from 25% to nearly 40% since the hearing began. For derivative traders, this signals more interest rate volatility in the coming weeks. The MOVE Index, which measures Treasury market volatility, has increased to 95 from a low of 88 last month, and we might see it go up even more. This environment is suitable for buying straddles or strangles on SOFR futures, betting that rates will shift sharply in one direction as the market adjusts to this new political reality alongside the economic data.

Historical Precedent and Market Impact

We recall a similar situation during 2018-2019 when ongoing political pressure led to sudden shifts in market sentiment and Fed policy. Back then, markets became overly sensitive to political statements, often overlooking key economic fundamentals temporarily. This historical context suggests we should expect the Fed to change its approach at the first sign of economic weakness, no matter what inflation data shows. Since Miran’s term only lasts until January, the most relevant trades are those with short timeframes. Options on futures that expire around the October and November FOMC meetings will likely see the most action. The key is to trade the uncertainty itself, as the market’s trust in a data-driven Federal Reserve is being directly tested. Create your live VT Markets account and start trading now.

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