Insights 
VT 
Bloomberg reports that most officials oppose a July interest rate cut. Fed Waller and Fed Bowman are leading supporters of a potential cut.
Fed Chair Jerome Powell noted that a July rate cut is possible, yet warned of inflationary effects from tariffs across June to August. June inflation data will be available by the end of July, but this may not be enough to alleviate policymakers’ concerns about inflation risks.
Concerns About Trade Talks
Concerns about ongoing inflation, driven by tariffs, could delay Federal Reserve action even if June numbers are lower than expected. Additionally, the unresolved trade talks increase the possibility of further tariff hikes.
Despite economic deals announced during a tour to Saudi Arabia, no formal trade agreements, including tariff relief, have been concluded. Key partners such as Canada, India, Japan, the EU, and China are waiting, making markets doubtful about substantive progress. Inflation uncertainty linked to trade policy might postpone any action until later this year.
The existing content outlines the Federal Reserve’s cautious stance on interest rates. Despite some support from Waller and Bowman for cutting rates, most central bank officials do not currently favour lowering them in July. Powell has stated that such a move remains on the table, but he flagged the inflationary pressures that may emerge from continuing or expanding tariffs in the summer months. That essentially means any signs of easing price pressures might be overshadowed by fresh policy risks. We’re likely to see June inflation figures by late July, yet even a weak reading may not put policymakers at ease if broader cost increases, especially from imports, persist.
The absence of binding trade agreements, particularly around tariff removal, adds to that tension. Without formal commitments from major partners like China or the EU, businesses and markets are left speculating whether the trade environment will worsen. Although negotiations are ongoing, there’s been scarce evidence of anything concrete. That keeps expectations around inflation elevated—rightly so. Traders should understand that policymakers are reluctant to lower rates into such uncertainty, even if economic data on the surface appears to support it.
Considerations For Monetary Policy
From where we stand, any shift toward easing policy likely depends on several things happening together. First, inflation would need to cool, and not just in the usual volatile categories, but in stickier areas like services and housing. More importantly, that weakness would have to continue into August or even September. Otherwise, the Fed risks being seen as undermining its own inflation goals for unclear economic gain.
In trading terms, we believe risk is skewed toward pricing in delay rather than speed. That is, the odds of rate cuts getting pushed into the final quarter of the year are climbing, and current pricing reflects only some of that hesitation. The market may be underestimating policymakers’ discomfort with trade-driven inflation variables that cannot be controlled through monetary tools. Despite the optimism around progress overseas, we’re watching the lag between words and enforceable outcomes.
Positioning should reflect that asymmetry. Short-term contracts remain vulnerable to repricing if rhetoric from officials tilts back toward inflation control instead of growth support. Forward volatilities hint that investors are holding back on firm direction calls until the July CPI release. But the assumption that a soft print guarantees policy relief is premature. Forward guidance hasn’t clearly supported pivoting just yet.
Expectations tied too tightly to single inflation prints should be treated with caution. Instead, it may make more sense to look at inter-month positioning, particularly around late Q3 maturities. Those offer more room to adjust once uncertainties over tariffs are resolved—or made worse. We’ve also noticed options activity clustering farther out, which matches this broader caution among deeper-pocketed players.
There isn’t yet a compelling case to chase early cuts. Until inflation shows broad-based declines and gains confidence from FOMC members beyond the most dovish, the risk of disappointment is higher with shorter expiry bets. That’s particularly true given tensions that continue around trade—with no relief mechanisms being locked in.
As we tread into July and August, the better-aligned moves may lie in asymmetric strategies that account for persistent policy pushback. Mid-term put spreads, calendar structures where time value is on the side of no change, and avoidance of binary exposure to July’s decision would all be prudent. We would argue that this isn’t the moment for chase trades. Rather, it’s about accounting for delayed clarity.
