Fed Chief Warsh Faces Rate Hike Decision Amid Oil Price Volatility

Analysts are divided on whether the US Federal Reserve will raise interest rates this week. Fed chairman Kevin Warsh is expected to make a decision at the end of its two-day policy meeting on Wednesday, July 29th. If he chooses to stay put, it's likely that he will warn markets of a hike at the next meeting in September.

The odds of a rate hike in July are now roughly 30% on the Fed funds futures markets, after being close to zero before the latest escalation in oil prices. The price of oil has shot up to test the US$100-per-barrel mark due to tensions with Iran and the Houthi allies trying to shut down an alternative route through the Red Sea.

Economists at Bank of America Global Research think that the Fed will stay on hold, but note that Warsh has the potential to go either way. They added that the spike in oil prices 'has made it a close call' for the central bank to raise rates this week.