Former Federal Reserve President James Bullard discussed recent monetary policy decisions, suggesting a series of interest rate cuts by the year’s end. He estimated that a reduction of 75 basis points by year-end could be impactful. Bullard noted that the neutral interest rate remains low, approximately 3.25%. <\/p>\n
He expressed a preference against a 50 basis point cut this week. For those with dovish views, he mentioned that a 25 basis point reduction this week and another in October would be nearly as favourable. Bullard, known for his hawkish stance, is a candidate for the Fed Chair position when Jerome Powell’s term concludes in May 2026.<\/p>\n
The Federal Reserve’s decision this week to cut rates by 25 basis points confirms a clear dovish pivot for the market. This move sets the stage for a predictable sequence of easing actions into the end of the year. We are now looking at a path of steady, measured rate reductions rather than an aggressive slash.<\/p>\n
Current market pricing has already absorbed this outlook, anticipating a total of 75 basis points in cuts by the time we close out 2025. This implies two more quarter-point reductions are on the way in the remaining meetings. We saw this expectation solidify after the latest non-farm payrolls report showed job growth cooling to 155,000, reinforcing the case for the Fed to support the economy.<\/p>\n
The decision to avoid a larger 50 basis point cut shows that policymakers are not in a state of panic. With the August CPI inflation report holding at 2.8%, the data supports a gradual approach to avoid reigniting price pressures. This deliberate pace is reminiscent of the mid-cycle adjustments we saw the Fed make back in 2019 to sustain the economic expansion.<\/p>\n
For derivatives traders, this reduces near-term uncertainty and should keep a lid on volatility. With the path for short-term rates seemingly set, implied volatility as measured by the VIX has already drifted down near 14. This environment suggests that selling front-month options premium could be a viable strategy in the coming weeks.<\/p>\n
Looking further out, the consensus that the neutral rate sits somewhere around 3.25% means this easing cycle has legs into 2026. The front-end of the yield curve appears well-anchored by the Fed’s current guidance. Therefore, trades that benefit from a steepening yield curve could be favorable as the market prices in a soft landing.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" James Bullard suggests potential 75 basis point rate cut by year-end, opposing immediate 50 basis point move.<\/p>\n","protected":false},"author":62,"featured_media":17027,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-31101","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/31101","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=31101"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/31101\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17027"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=31101"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=31101"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=31101"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}