Stephen Miran expects the Federal Reserve to cut rates by 50 basis points at each meeting this year, based on his forecast. This view suggests he might support Trump’s economic policies. Miran will be on CNBC soon, where he may share more about his economic views. Many are curious how he will handle any criticism during the interview.

Addressing The Market

A Fed governor is now advocating for 50 basis point cuts at every remaining meeting in 2025. The front end of the curve is the best place to take action. We should consider increasing our long positions in SOFR futures for the December 2025 and March 2026 contracts. Comments like these, whether they’re serious or just a trial balloon, will push the market to expect a faster pace of rate cuts. This stance is quite bold, especially since the August 2025 CPI report showed inflation remains stubborn at 2.8%, higher than the Fed’s target. However, with the latest jobs report indicating payroll growth slowing to 150,000 and unemployment rising to 4.2%, he has some justification for his dovish perspective. The market currently anticipates only about 75 basis points of cuts by year-end, revealing a trading opportunity. We see this as a driver for a notable spike in interest rate volatility, which has been relatively low this year. The MOVE index, an essential gauge of bond market volatility, is close to its lows for 2025, making long volatility strategies attractive. Buying calls on the VIX before the next FOMC meeting could be a smart way to prepare for incoming market uncertainty.

Pressure On The US Dollar

If the Fed cuts rates so aggressively while other central banks like the ECB stay firm, it would put a lot of pressure on the US dollar. This situation reminds us of late 2018 when the Fed halted its rate hikes, resulting in a temporary dip in the dollar. We should think about buying inexpensive, out-of-the-money call options on EUR/USD that expire in December. The equity market will likely see this as a strong signal, especially for tech and growth stocks sensitive to interest rates. The Nasdaq has been trading in a narrow range for most of the third quarter of 2025. This could be the spark needed for a breakout, so we are looking at call spreads on the QQQ to prepare for a potential year-end rally. Create your live VT Markets account and start trading now.

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