Minutes from the Federal Reserve’s 28–29 April meeting showed many officials wanted to drop the easing bias from the policy statement. Most participants said further policy firming could be appropriate if inflation stays above the 2% target.
Officials pointed to Middle East tensions, higher energy prices and tariff pressures as upside risks to inflation. Some warned these factors could embed price pressures more widely, complicating any move to reduce rates.
Policy Outlook And Inflation Risks
Several participants said cuts later in the year could be warranted if geopolitics stabilises and inflation eases. A smaller group said reductions should wait for clearer evidence that disinflation is firmly back on track.
The policy rate was left unchanged at 3.50%–3.75% for a third straight meeting. Stephen Miran backed a 25-basis-point cut, while Beth Hammack, Neel Kashkari and Lorie Logan dissented against keeping an easing bias.
Recent data cited included CPI inflation at 3.8% year on year in April, and Nonfarm Payrolls growth of 115K versus 185K in March and 62K expected. The Fed staff outlook was upgraded slightly versus March.
The minutes were released at 18:00 GMT on Wednesday, with a prior preview at 13:15 GMT. FedWatch put the chance of a 25 bps hike by December at 40.1% versus 43.4% for a hold.
Dollar Rates And Market Positioning
The US Dollar Index tested 99.00 support and was at 99.43, with RSI near 72. Technical levels referenced included 99.49, 100.00, 100.64, 99.13, 98.78, 98.59, 98.50, 98.34 and 97.63.
Looking back at the Fed minutes from April 2025, we can see the clear warnings about the stubborn inflation we face today. The hawkish tone and discussion about upside risks from energy prices were a signal that the “higher-for-longer” narrative was becoming policy. Many officials back then were already uncomfortable with an easing bias, setting the stage for where we are now.
Those warnings proved accurate, as the latest Consumer Price Index (CPI) data for April 2026 showed core inflation remains elevated at 3.5%. This is why we now see the Fed funds rate holding firm in the 4.00%-4.25% range, a full 50 basis points higher than it was at the time of that 2025 meeting. The resilience of the economy has given the Fed the room it needs to keep policy tight.
For derivatives traders, this means pricing out any significant rate cuts for the remainder of the year is the prudent move. We believe strategies that benefit from rates staying elevated, such as using SOFR options to bet against a dovish pivot, should be favored. The yield curve has remained flat for much of the past year, and there is little reason to expect that to change in the coming weeks.
This policy path has directly fueled the dollar’s momentum, which was a key takeaway from the developments in 2025. The US Dollar Index (DXY), which was trading around the 99.40 level back then, is now trading consistently above 104.00. This sustained strength is a direct result of the interest rate advantage the US maintains over other major economies.
Given this, we think using options to express a bullish view on the dollar remains a viable strategy. Buying USD call options against currencies where the central bank is more likely to ease policy could offer significant upside. Selling out-of-the-money puts on the dollar could also be a way to collect premium, assuming this trend of strength holds firm.
The geopolitical risks highlighted in the 2025 minutes are still very much with us, keeping a floor under energy prices. With West Texas Intermediate (WTI) crude oil consistently trading above $85 per barrel, this continues to feed into inflation and supports the Fed’s cautious stance. Last year, we saw how quickly tensions could escalate, and that risk premium is now embedded in the market.
This backdrop suggests that holding long positions in oil-related derivatives could act as an effective inflation hedge. Call options on crude futures could perform well if geopolitical tensions flare up again, an event that would reinforce the Fed’s commitment to tight policy. This strategy aligns with the core risks that policymakers themselves identified over a year ago.
