BlockBeats news, on September 9, as oil prices neared $100 per barrel, James Thorne, Chief Market Strategist at Wellington Altus, warned that if the Federal Reserve raises interest rates amid an energy supply shock, it may repeat the policy mistake made before the 2008 financial crisis by misinterpreting rising energy prices as signs of overheating demand.
Thorne stated that rising energy prices, while contributing to inflation, also erode household purchasing power and dampen economic growth. If the Fed tightens financial conditions further to demonstrate its commitment to fighting inflation, it could exacerbate the risk of economic downturn. He believes the current policy environment bears similarities to the period before the 2008 crisis, when the Fed focused excessively on inflation risks from energy prices while underestimating the economic impact of high energy costs.
Over the past month, WTI crude oil has risen more than 20%, while Brent crude has increased over 18%. Meanwhile, a New York Fed survey shows that U.S. consumers’ views on their household financial conditions have further deteriorated, with the probability of rising unemployment over the next year increasing to 44.4%, the highest level since April 2020.
The Federal Reserve will hold its policy meeting on September 15–16, following five consecutive holds on interest rates. Markets are currently focusing on the U.S. August PPI and CPI data released this week to assess whether energy shocks will prompt the Fed to reconsider raising rates.