Governor Waller’s Speech

Federal Reserve Board Governor Christopher Waller will share his economic outlook at an event in Miami. The presentation is set for Thursday, August 28, 2025, at 6:00 PM US Eastern time or 10:00 PM GMT. This event comes after Waller’s attempts to secure the Fed Chair position. It gives him a chance to discuss important economic issues in the current financial climate. Governor Waller’s speech is crucial because his potential bid for the Fed Chair could create uncertainty in monetary policy. We are curious to see if his economic outlook shifts from his usual hawkish view to a more favorable growth stance. This possible change is stirring tensions in the interest rate futures market. Recent economic data supports his arguments in both directions. The July 2025 CPI report showed that core inflation remains stubbornly high at 3.1%, above the Fed’s target. However, the latest employment numbers revealed slower job growth at 175,000, which could justify a more cautious approach. Currently, the derivatives market indicates a 60% chance of a 25 basis point rate cut by the December 2025 FOMC meeting. Waller’s comments tonight could either confirm these expectations and boost the markets or dampen them, leading to a sell-off. His tone is more crucial than the specific data he references.

Market Implications

With the VIX at a relatively low 14, we think buying short-term options is wise. A straddle on the S&P 500, which benefits from significant price movements in either direction, is a smart way to trade the uncertainty around the speech. We expect implied volatility to rise before his speech and to drop sharply afterward. We’ve seen similar situations before. For instance, when Chairman Powell changed his hawkish stance in late 2018 due to political pressure, it triggered a major market rally in 2019. A similar signal from a known hawk like Waller could ignite a strong response in risk assets. History shows that a perceived change in the Fed’s position can be more influential than economic data itself. In the coming weeks, we will monitor how markets react to his speech and whether other Fed members share his views. A dovish signal would lead us to position for a year-end rally by buying call spreads on major indices. If he stays firmly hawkish, we would consider purchasing puts for protection against a market that might adjust to a “higher for longer” interest rate scenario. Create your live VT Markets account and start trading now.

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