Insights 
VT 
The Federal Reserve’s Daly expressed that a substantial rate cut next month does not appear necessary. She mentioned concerns that such a move might convey an undue sense of urgency regarding the labour market’s strength.
Daly emphasised a preference for a gradual transition to a more neutral interest rate setting over the next year. She indicated that there is no current need to hasten adjustments based on existing data.
Steady Approach Over Quick Shift
The stance suggests a steady approach rather than a quick shift in monetary policy. There is no indication from current data that would justify a significant rate cut at this time.
It seems a large 50 basis point rate cut for September is now off the table. Before this, derivative markets, like the CME FedWatch tool, were pricing in nearly a 40% chance of such an aggressive move. We see this as a clear signal that the Federal Reserve feels no urgency to act boldly.
Frankly, the economic data doesn’t justify a panic move. We just saw the July 2025 jobs report add a steady 195,000 positions, keeping unemployment stable at 3.8%. With the latest core inflation reading now hovering at 2.4%, the numbers simply don’t scream “emergency.”
This points toward a strategy of selling volatility in the weeks ahead. A “gradual” path telegraphs the Fed’s moves, which is the enemy of market uncertainty and big price swings. This is a very different environment from the wild swings we saw back in 2022 and 2023 when policy was far less predictable.
Reevaluating Positions In Light Of Cautious Reality
Traders should therefore re-evaluate positions that were betting on deep cuts. The focus will likely shift to pricing in a single, standard 25 basis point cut in September, or perhaps even a pause. Expect adjustments in Fed Funds futures and options on SOFR to reflect this more cautious reality.
For equity options, this outlook dampens the case for explosive upside moves driven by aggressive easing. Strategies that benefit from a steady, grinding market, rather than a volatile one, seem more appropriate now. We believe a slow and steady policy path provides a stable floor for the market.
