Wall Street's inflation-watchers are counting on cheaper oil to take the sting out of rising food prices in the months ahead.

World oil prices have fallen sharply amid signs that oil-exporting countries are producing faster than market demand can absorb. West Texas Intermediate crude oil, widely used as an overall gauge of the trend in oil prices, dropped below $15 a barrel Friday to its lowest level since 1986.That news, together with some rainfall at last in the parched Farm Belt, has encouraged talk in the financial markets that inflation might not be as bad as had been feared in the second half of 1988.

One of the most reliable barometers of inflationary expectations, the yield on 30-year Treasury bonds, has fallen from a peak of nearly 9.5 percent several weeks ago to less than 9 percent in recent days.

The drought watch continues on Wall Street. While current weather charts showed rain in the Midwest this past week, traders in futures and financial markets switched their attention to forecasts suggesting unusually dry conditions in coming weeks.

For the national economy, however, many analysts say it is necessary to keep the role of agricultural commodities in perspective.

"Although the drought could be the worst in nearly a century, it should be kept in mind that the importance of raw food commodities has changed dramatically over the years, and the impact of sharp price rises in this area is not particularly great on consumer spending or the inflation indices," said Michael Sherman, analyst at Shearson Lehman Hutton Inc.

David A. Levy and S. Jay Levy, a Chappaqua, N.Y., economic forecasting team, say they have no desire the minimize the distress the drought is causing for farmers and other businesses in agricultural areas.

However, they add, "the drought will indeed increase the prices of many foods but have limited impact on inflation. Food and beverages account for less than 18 percent of the Consumer Price Index."

Furthermore, they add, rising food prices actually can serve to depress prices of many non-food items.

"As food prices accelerate this year, non-food stores, especially those competing for consumers' discretionary income, will lose some sales. Price-cutting will be more frequent. This deflationary effect will substantially reduce the overall impact of the drought on the CPI to about half a percent."

Despite such assurances, the stock market's early-summer rally bogged down in the past week. The Dow Jones average of 30 industrials slipped 11.38 to 2,131.58, ending a five-week winning streak.

The New York Stock Exchange composite index dropped .88 to 153.68; the NASDAQ composite index for the over-the-counter market rose 3.08 to 394.70, and the American Stock Exchange market value index was up .51 at 309.00.

Volume on the Big Board averaged 208.42 million shares a day, against 170.99 million the week before.