Federal Reserve Chair Waller made a tough statement at Jackson Hole on August 28: "Inflation remains above the 2% target, and the Fed's primary focus should be on prices."
On the same day—his second-in-command, New York Fed President Williams, said at the University at Buffalo: "There is currently no urgent need to act." The third-in-command, Vice Chair Jefferson, followed up at the University of Virginia: "Any policy adjustments may require more time to assess data." The Vice Chair in charge of supervision, Bowman, also said that day: "There is currently no urgent need to take further action."
The same central bank, the Chair says to focus on inflation, but the second, third, and fourth-in-command say hold off.
This is not a disagreement; this is an open split.
The New York Fed President and Vice Chair simultaneously contradicting the Chair—such an event hasn't happened in years.
But the real conclusion to this split wasn't the Fed—it was oil prices.
🛢️ On October 2, the G7 took action.
The Group of Seven, coordinated through the IEA, announced it would release up to 100 million barrels of crude and refined oil reserves over the next four months, prioritizing large-scale diesel releases in the first 20 days. On that day, U.S. WTI crude briefly fell below $88.10 per barrel, dropping nearly 5.2% intraday; Brent crude fell below $98.50 per barrel, down nearly 3.8% intraday.
The Financial Times reported that European diesel prices had already dropped nearly 6% before the G7's official announcement.
Oil prices went down.
🧩 Putting these two events together reveals a clever closed loop.
Waller repeatedly said, "Inflation is too high, and rate hikes are on the table." What is his core logic? High oil prices are pushing overall inflation—Middle East conflicts have cut about one-fifth of global oil supply, diesel prices are near record highs, and the AI boom is still driving up chip prices.
Kashkari has made it clear: "The Fed's job is to bring inflation back to 2%, but interest rates can't open the Strait of Hormuz, nor can they suppress oil prices."
The Fed admits: it can't control oil prices.
So who can? The G7. Since the Fed says it can't control energy inflation, the G7 steps in. The release of 100 million barrels essentially helps the Fed "defuse the bomb"—lower oil prices remove the hawks' most important argument.
📉 Numbers don't lie.
As of October 1, the CME FedWatch tool showed the probability of a 25 basis point hike in October plummeted from about 68.6% a week ago to 24.9%, while the chance of holding rates steady rose above 70%.
Goldman Sachs, after the PCE data release, pushed the expected second rate hike from October to December, explicitly stating "the likelihood of a rate hike in October is low."
After Jefferson's remarks, the 10-year U.S. Treasury yield retreated from a 24-year high. The dollar index accelerated its drop from a one-and-a-half-year high.
The rate hike trade is unraveling. Funds are retreating from the hawkish narrative.
🔁 History repeats itself. And only seven months apart.
In March this year, the IEA coordinated the release of 400 million barrels of emergency oil reserves—the largest scale ever. At that time, Bitcoin was under pressure near $68,000. After the news broke, oil prices plummeted, and Bitcoin quickly rebounded to the $69,000–$71,727 range, rising about 20% in a short time.
The transmission chain then was exactly the same as now: oil prices fall → energy inflation expectations decline → rate hike pressure eases → risk assets rebound.
The logic hasn't changed, only the ammunition is less this time—400 million barrels were released in March, now only 100 million. But the direction is the same.
🎯 But one thing the hawks are right about.
Kashkari repeatedly emphasizes: inflation is not just in oil prices; it "is widespread across the economy," with service sector price pressures accelerating faster than in June. Logan is even more blunt, saying the September rate hike was only the first step, and another 50 basis points are needed.
Waller himself corrected his vague July statement at Jackson Hole about "letting the market hike rates instead of the Fed," attributing the 65 months of inflation overshoot to the central bank itself.
This shows the direction hasn't changed; only the pace has.
The Fed doesn't not want to hike; oil prices gave it a graceful way out. Rate hike before the midterm elections in October? UBS bluntly says—over the past 35 years, the Fed has never hiked rates at the October meeting before midterms.
Waller talks tough, but oil prices made the choice for him.
/ What about Bitcoin?
Bitcoin currently holds steady near $84,300. Over the past seven days, oil prices have dropped about 10%, providing more support to Bitcoin than any crypto news. Institutional funds are re-entering, and Bitcoin has gained 13% cumulatively in this rebound.
But don't celebrate too soon. U.S. manufacturing input prices are broadly rising, and September ISM data shows cost pressures spreading, setting a ceiling on Bitcoin's upside. Brent crude remains near $100, and the 10-year Treasury yield hasn't truly fallen—these three stones still weigh on risk assets.
The probability of Bitcoin hitting $85,000 in October is 90%, $87,500 is 70%, but only 48% for $90,000.
There is room, but not much.
Waller's words are tough: "Inflation above 2%, the Fed must keep a close eye on prices."
But a central bank that can't even control oil prices—what can it use to control inflation?
Kashkari has admitted the tools are insufficient. The G7's 100 million barrels essentially do what the Fed cannot.
Once the biggest "nail" of energy inflation is pulled out, what reason does the Fed have to hike rates a week before midterms?
Falling oil prices offer the dovish camp the best exit ramp.
The market has understood. You should too.
$BTC$BZ$CL#美伊局势持续紧张，G7将释放最多1亿桶储备
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