Wash has been in the position of Chairman of the Federal Reserve for over 120 days. Just as the market was barely sketching out a “Wash framework” around his 127th day in office, another narrative that determines the trend of inflation almost simultaneously came into focus: on September 25, it was reported that representatives from the U.S. and Iran were in touch regarding a phased ceasefire during the United Nations General Assembly, with proposals including reopening the Strait of Hormuz within seven days in exchange for the U.S. easing economic sanctions. Upon the news, international oil prices dropped nearly 2% during trading, as traders began to preemptively trade on the potential for “diplomatic restoration of energy supply,” while the tight diesel supply and discussions of a “diesel crisis” were brewing, adding a difficult-to-reduce base to prices. On one side, Wash is reshaping the policy narrative and weakening the traditional neutral interest rate anchor, making the interest rate path more dependent on real-time data and subjective judgment; on the other side, expectations for a U.S.-Iran ceasefire and the diesel crisis created hedging signals regarding oil prices, making the inflation outlook increasingly murky. Under such dual uncertainty, the market lost a clear trajectory for future interest rates and inflation pricing. Every statement from the Federal Reserve and every piece of news about the Strait of Hormuz and diesel supply could be amplified into a trigger for a new round of severe volatility in risk assets.
Wash's 127 Days in Office: Press Conference Rewritten
Shortly after taking office, Wash did not change the dot plot; instead, he altered the show in front of the cameras. The press conference following the monetary policy meeting was significantly shortened in duration, transforming what was once a lengthy Q&A session into a compact window of just a few dozen minutes; the order of journalists' questions was also rewritten to be sorted alphabetically by the name of the news organization in English, effectively locking out the era where seasoned reporters could secure the “first question” through their connections. On the surface, this seemed like a process optimization, but traders familiar with the rhythm of the Federal Reserve quickly realized that this indicated the chairman's control over the flow of information had been significantly tightened, leaving less room for unexpected remarks and improvisation.
As time went by, by the time Wash was nearing his 127th day at the helm of the Federal Reserve, the market began to piece together these “superficial small moves” into a more complete picture: the press conference was no longer a showcase for differing opinions among committee members, but rather appeared to be a platform for Wash's personal framework. The duration was compressed, and the uncertainty that could be publicly discussed was curtailed; alphabetizing the questions weakened the ability of a few “key reporters” to set the agenda, bringing the discussion back to the track pre-established by the chairman. Multiple media outlets have compared this style to that of the Greenspan era — characterized by a high concentration of discourse power, making the market hang on every adjective; only this time, the market was not sensing a return to tradition, but rather a set of preparations behind the scenes to rewrite the interest rate anchor and policy language known as the “Wash framework.”
Abandoning the Neutral Interest Rate: Risks of the Federal Reserve's New Narrative
As the outside world began to label the new chairman with the “Wash framework,” a keyword that was continuously amplified by the media was “abandoning the neutral interest rate” (according to a single source A). For a long time, the neutral interest rate has been regarded as an invisible ruler: when the policy interest rate is above it, it is understood as tight, and when below, it is considered loose. Nowadays, in reports and commentary, Wash seems to deliberately remove this ruler from the public narrative, no longer emphasizing “how many basis points away from neutral,” but repeatedly pointing to vague and flexible expressions such as “real-time data” and “risk balance.” It is important to emphasize that there are currently no official documents from the Federal Reserve announcing the abandonment of the neutral interest rate concept, but weakening this anchor in communication itself is a choice, signifying that the market has lost a traditional reference point.
Once the anchor is removed, the first impact occurs in pricing methods. In the past, traders could quickly reach a consensus on whether “interest rates relative to neutral are tight or loose,” but now they are forced to interpret Wash's subjective assessments of inflation resilience, energy supply, and the so-called “diesel crisis” (macro background judgment), attempting to reconstruct an unseen response function from fragmented statements. Media has juxtaposed this style with the Greenspan era (according to a single source A): similarly relying heavily on real-time data and judgment, only this time, Wash faces more stubborn price pressures rather than an inflation cycle that can comfortably recede. In such an environment, with the “rule line” of the neutral interest rate missing, there is more reliance on personal inclinations of the chairman; every unexpected data point or change in wording during a press conference could be magnified into a signal of a path shift, adding a layer of subjective uncertainty to the interest rate curve and risk assets that is difficult to hedge.
Seven-Day Reopening of the Strait of Hormuz Expected to Pull Down Oil Prices
On September 25, Telegram source A reported an unconfirmed message: U.S. and Iranian representatives engaged in contact regarding a “phased ceasefire” during the United Nations General Assembly, with the stakes on the table not being abstract political declarations, but actual exchange of trade routes and sanctions. According to this source, one of the negotiation proposals is to reopen the Strait of Hormuz within seven days in exchange for U.S. easing of economic sanctions. This “seven-day countdown” design was interpreted by the market as the first concrete timeline for restoring Middle Eastern energy supplies through diplomatic means, rather than being just a “calming signal” limited to rhetoric.
Once the news broke, the market almost instinctively reacted. Before any official documents were made public, some traders already chose to express their positions: international oil prices dropped nearly 2% during trading, as they viewed it as an anticipation of supply restoration following the reopening of the Strait of Hormuz. The risk of energy inflation has long weighed heavily on Wash, and now even just a negotiation draft from a single source was enough to displace short-term price reassessments. However, according to the same source, significant differences still exist between the U.S. and Iran on key issues such as the jurisdiction over the Strait of Hormuz and the extent of U.S. sanctions relief, and there has been no official agreement or text published, meaning that the current drop in oil prices is largely based on fragile expectations rather than on a secured trade route and new supply.
Diesel Crisis Holds Back Inflation, Limiting Wash's Space
Oil prices dropped nearly 2% due to the U.S.-Iran engagement during the U.N. period and the market's preemptive trading on the “seven-day reopening of the Strait of Hormuz” (according to a single source A), on the surface seeming to slightly lift the heavy energy burden pressing down on Wash. However, almost simultaneously, the term “diesel crisis” was repeatedly mentioned in market discussions, pointing not to nominal oil prices on futures markets, but rather to the increasingly tense diesel supply and related price pressures in the real world. As a key fuel for transportation and industry, when diesel supply tightens, costs amplify through the logistics, warehousing, and manufacturing sectors, leading upstream oil prices to fall while end prices struggle to decrease swiftly, showing an inflation resilience propped up by the shortages of refined fuels.
The risk of energy inflation and the adjustment of the Federal Reserve's monetary policy have long been co-equal focal points of market pricing. However, a subtle misalignment has formed: on one side, there is the calming of nominal oil prices based on expectations of a U.S.-Iran ceasefire, while on the other side, there is the high-cost reality maintained by actual supply-demand balances and shortages of middle and lower-stream fuels. In such an environment, even though the outside world has summarized the new chairman of over 120 days in office as embodying a “weakening or even abandoning the neutral interest rate” in the “Wash framework” (according to a single source A), rewriting the nominal theoretical anchor does not automatically create expansive space for interest rate cuts — as long as the diesel crisis is still seen as a major source of inflation resilience, any substantive easing actions by Wash are easily interpreted as a concession in the face of high costs. What he truly lacks is not new interest rate lexicon, but a convincing trajectory of price decline that can persuade the market post-relief from diesel pressure.
Betting on Interest Rate Paths in the New Framework and Energy Game
Under the “weakened neutral interest rate” framework of Wash, the traditional ruler used to gauge the tightness of interest rates has been partially abandoned (according to a single source A), combined with the U.S.-Iran phased ceasefire and contact about reopening the Strait of Hormuz still remaining at the “news” level, while the diesel crisis continues to underpin prices. The future of inflation and interest rates resembles a broad range: on one end, there is the inflation resilience propped up by tight diesel supply, forcing the high interest rate state to be prolonged; on the other end, if U.S.-Iran negotiations unexpectedly proceed smoothly and oil prices decline again under supply restoration expectations, there exists a passive window for inflation alleviation that the Federal Reserve could receive. The failure of single indicators, along with the back-and-forth reversals of geopolitical and energy narratives, means that the pricing anchor points of the yield curve are shifting, with traders amplifying their interpretations of every statement from Wash and every compressed post-meeting press conference. U.S. Treasuries first reflect the uncertainty of the interest rate path, while the stock market and crypto assets then amplify emotions dramatically amid the dual oscillation of discount rates and risk preferences. Betting on macro-sensitive assets in this phase is closer to a combined wager on “discourse power and oil tanker routes,” where the true determinant direction is not a single long shadow of oil prices or interest rates in the market, but rather whether subsequent formal statements from the Federal Reserve and progress on the agreement texts in U.S.-Iran negotiations can provide a clearer evolution of prices and interest rates.
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