Oil prices have fallen more than 9% cumulatively, easing inflationary pressures—can this have a substantive impact on the Federal Reserve's judgment before the PCE release?

Oil prices dropping over 9% indeed theoretically leaves room for the Fed's policy. However, the probability of a rate hike in September remains firmly pinned at 76%. What does this indicate? It shows that the Federal Reserve simply does not buy into this.

The decline in oil prices does have a real effect on easing inflation, but it is "transitory." The Fed is most afraid of core inflation and the wage-price spiral. Even if oil prices fall, core PCE could still come in above expectations. The Fed will not change its already established tightening path just because oil prices temporarily decline.

My view is: the impact of falling oil prices on the Fed's judgment before the PCE report is minimal. It might slightly ease some dovish members' concerns, but it won't change the overall hawkish tone. If the market still expects oil prices to save the Fed, it is essentially setting itself up for disappointment. #美伊谈判第一轮结束