Fed Rate Hike Odds Drop as Inflation Cools and Oil Holds Near $80, Fueling Risk-On Rally
WisdomTree economist Jeremy Siegel expects the Fed to pause rate hikes in September if crude remains near $80. Cooling CPI and PPI prints are driving down PCE inflation estimates and squeezing hike odds. Macro liquidity conditions are rapidly shifting back toward risk assets as equity markets hit new highs.
Cooling inflation metrics are clearing the runway for a macro risk-on pivot. Soft CPI and PPI data forced major banks to downgrade their PCE inflation forecasts, giving the Federal Reserve ample room to hold interest rates steady in September.
A key driver behind this shifting narrative is crude oil, which has tumbled down to $80 from earlier highs near $100. As energy pressures ease and corporate earnings widen on efficiency gains, capital is rotating fast into value names and risk-sensitive liquidity plays.
For crypto traders, a dovish Fed stance coupled with stabilizing energy costs removes major macro headwinds. With interest rate expectations topping out, broader financial conditions are loosening—a backdrop that historically unleashes capital flows right into digital assets.