Stephen Miran officially joined the Federal Reserve today as a new Fed Governor, just in time for the Federal Open Market Committee (FOMC) meeting. Former President Trump emphasized the importance of the Fed’s independence while Miran, who was his chief economist and led the Council of Economic Advisers, received the presidential signature without leaving his previous position. The main issue with Miran is how he will approach interest rate changes. It’s uncertain whether he will back a 25 basis point (bps) cut or push for a more immediate 50 bps cut.

The Impact of Miran’s Appointment

With Miran on board, the Fed’s dovish wing has gained a strong, politically-connected advocate. The discussion has shifted from whether to cut rates to how much and how quickly. This political appointment increases the likelihood of more aggressive easing, no matter what some data suggests. This development comes as the economy shows signs of slowing down, making a rate cut more justifiable. For example, GDP growth for Q2 2025 was revised down to just 1.5%, and the August 2025 jobs report indicated unemployment rose to 4.1%. Miran’s influence offers political support to push for significant cuts right away. We expect higher market volatility as a result. With the Fed’s decisions now swayed by political pressures, its future actions are more unpredictable. Thus, we are buying front-month VIX futures. We think the VIX, which is around 16, will likely rise to the 20 level as the market adjusts to this new uncertainty regarding Fed independence.

Positioning for Lower Interest Rates

We are preparing for lower interest rates across the board, focusing particularly on the short end. The 2-year Treasury yield, which reacts quickly to Fed policies, is crucial to monitor. We expect SOFR futures for the December 2025 and March 2026 meetings to indicate at least another 25 basis points cut within the upcoming week. This isn’t our first time facing such a situation; we saw a similar pattern in 2019. After considerable political pressure from the White House, the Fed changed its course and started cutting rates. This historical trend suggests that a direct political appointment will likely speed up a shift toward easier monetary policy. An aggressive Fed often leads to a weaker U.S. dollar. As the market processes the increased likelihood of deeper rate cuts compared to the European Central Bank or the Bank of England, we anticipate capital flowing out of the dollar. We are considering buying call options on the Euro and British Pound against the dollar, targeting strikes that are 2-3% above the current spot price. Create your live VT Markets account and start trading now.

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