Governor Waller’s Speech
Federal Reserve Board Governor Christopher Waller will present his economic outlook at an event in Miami. The presentation is scheduled for Thursday, August 28, 2025, at 1800 US Eastern time or 2200 GMT.
This appearance follows Waller’s efforts to secure the Fed Chair position. The event allows him to address economic matters within the current financial landscape.
Governor Waller’s speech tonight is a significant event because his potential bid for the Fed Chair job introduces political uncertainty into monetary policy. We are watching to see if his economic outlook deviates from his historically hawkish stance to align with a more pro-growth narrative. This potential shift is creating tension in the interest rate futures market.
The latest economic data gives him cover to argue in either direction. The July 2025 CPI report released a few weeks ago showed core inflation is still proving sticky at 3.1%, well above the Fed’s target. However, the most recent employment report showed job growth moderating to 175,000, giving a reason to argue for a more patient policy approach.
Currently, the derivatives market is pricing in a 60% probability of a 25 basis point rate cut by the December 2025 FOMC meeting. Waller’s comments tonight could solidify these expectations, sending markets higher, or throw cold water on them, causing a sell-off. His tone is more important than the specific data he cites.
Market Implications
With the VIX trading at a relatively low level of 14, we believe owning short-term options is a prudent strategy. A straddle on the S&P 500, which profits from a large move in either direction, is an effective way to trade the uncertainty of the outcome. We expect implied volatility to rise heading into his speech and to fall sharply afterward.
We have seen this sort of dynamic before, such as when Chairman Powell pivoted away from his hawkish policy path in late 2018 following political pressure, which led to a major market rally in 2019. A similar signal from a known hawk like Waller could be a powerful catalyst for risk assets. The historical precedent shows that a perceived change in Fed reaction can be more impactful than the economic data itself.
In the coming weeks, we will watch how markets digest his speech and if other Fed members echo his sentiment. A dovish signal would encourage us to position for a year-end rally by buying call spreads on major indices. Should he remain firmly hawkish, we would look to purchase puts as protection against the market repricing a “higher for longer” interest rate environment.
