Oil prices approach $100, strategists warn the Fed risks repeating 2008 if it raises rates.

BlockBeats News, September 9 — As oil prices approach $100 per barrel again, James Thorne, Chief Market Strategist at Wellington Altus, warned that if the Federal Reserve raises interest rates amid an energy supply shock, it could repeat the policy mistakes made before the 2008 financial crisis by misjudging rising energy prices as overheating economic demand.

Thorne stated that while rising energy prices push up inflation, they also erode household purchasing power and weigh on economic growth. If the Fed further tightens financial conditions to demonstrate its resolve against inflation, it may instead exacerbate downside risks to the economy. He believes the current policy environment shares similarities with the period before the 2008 crisis, when the Fed over-focused on inflation risks from energy prices while underestimating the economic impact of high energy costs.

Recently, WTI crude oil has surged over 20% within a month, and Brent crude has risen over 18%. Meanwhile, a New York Fed survey shows U.S. consumers' views on their household financial situation have further deteriorated, with the probability of expecting a rising unemployment rate over the next year climbing to 44.4%, the highest since April 2020.

The Fed is set to hold its policy meeting on September 15-16, having already kept interest rates unchanged for five consecutive meetings. The market is now focused on this week's U.S. August PPI and CPI data to determine whether the energy shock will push the Fed to reconsider rate hikes.