Trump visits Federal Reserve construction site, supports Powell and asks for lower interest rates
by VT Markets
/
Jul 25, 2025
Trump visited the Federal Reserve construction site to push for lower interest rates. He pointed out that costs increased from $2.5 billion to $3.1 billion, but Powell explained that Trump included a third renovated building in his figures.
When asked what would change his opinion of Powell, Trump joked that he would be pleased if interest rates were reduced. He mentioned that firing Powell isn’t necessary and described it as a major decision.
Impact On Market Volatility
We think Trump’s recent statement reduces a major risk for the market. This should lead to lower implied volatility, making it more appealing to sell options. For example, the Cboe Volatility Index (VIX), currently around 14, could drop further as political uncertainty decreases.
The ongoing push for lower rates supports the current market trend. The CME FedWatch Tool shows an over 85% chance of at least one 25-basis-point cut by the end of the year. While this situation doesn’t alter our views, it keeps the focus on upcoming decisions from the Federal Open Market Committee.
Historically, the central bank focuses on economic data rather than political debates. The latest Core PCE Price Index shows inflation at 2.8%, still above the target. Any actions by the current chair will be based on data, not politics. Therefore, we’ll shape our positions based on upcoming reports about inflation and employment, rather than political events.
Strategic Investment Positioning
Our strategy will focus on benefiting from a steady, supportive policy environment. This might include selling out-of-the-money puts on equity indices to earn premium, taking advantage of lower volatility and expectations for supportive monetary policy. With this political risk now removed, the need for costly downside protection has decreased.
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by VT Markets
Jul 25, 2025
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