Insights 
VT 
Wage increases have resumed to the levels seen before the pandemic, as reported by Atlanta Fed President Raphael Bostic. In a recent online town hall, he mentioned ongoing discussions about the extent to which companies can transfer tariff costs and consumer tolerance levels.
Bostic stated that he does not see a requirement to elevate interest rates as a measure against inflation. This perspective reflects an analysis of current economic conditions and the effect on wages and consumer spending.
Macroeconomic Conditions and Monetary Policy
This recent commentary from Bostic provides a clear assessment of the macroeconomic conditions currently shaping monetary policy considerations. By stating that wages have returned to pre-pandemic growth rates, he implies that labour market pressures are no longer accelerating at an unusual pace. That in turn suggests inflationary risks stemming from wage growth may be levelling off. From our perspective, this should not be downplayed, especially when gauging pricing models driven by forward expectations.
The reference to companies exploring how much of the tariff burden can be passed onto consumers tells us that input cost pressures are being examined more carefully. But what matters more here is that consumer resilience—specifically, whether people will accept higher prices—is a current topic inside Federal Reserve discussions. He is clearly pointing to demand-side sensitivity as a key variable. This casts a new lens on inflation measures, suggesting they are not solely dictated by supply shocks but also by how constrained household budgets are behaving now.
His view on interest rates not needing to increase further is arguably the most direct comment relevant to forward rate pricing. When a policymaker of his rank asserts that elevated levels are likely appropriate and stable, the inference for near-term rate volatility is obvious. That being said, the market should not see this as a commitment towards a cut either, just a shift towards a bias of patience.
Adjusting Market Strategies
Given this backdrop, we are recalibrating exposure in rate futures and options accordingly. One thing is clear—downside plays on rate volatility may have a better payoff profile than they did just a few weeks ago, especially in light of the Fed showing little appetite to overtighten.
There remains some uncertainty, of course, around how persistent some price pressures may be in areas like housing and services. But those appear to be decelerating, and Bostic’s comments reinforce this reading. For now, that means pricing curves can reflect stability rather than surprise.
With these specific cues taken directly from remarks—not speculation—we see room to gradually reduce convexity hedges and adjust strike levels further out. Timing entry points around lower implieds may become more strategic as policy communication maintains this tone. Proceeding that way feels justifiable.
