Fed Decision Hinges on Oil Prices as Brokerages Call July Rate Decision a Close Call

A growing number of major brokerages are now warning that this week's Federal Reserve decision may be a close call, as concerns about inflation and rising oil prices take center stage.

The surge in oil prices, which hit $100 a barrel last week, has added pressure on the Fed to raise interest rates to control inflation. The July rate decision is now seen as a difficult choice for Fed Chair Kevin Warsh, with some strategists warning that failing to hike could challenge the central bank's credibility on inflation.

While most brokerages still expect the Fed to keep rates unchanged this year, BofA Global Research and Deutsche Bank are among those forecasting rate hikes starting in September. UBS Global Research also noted that Warsh's influence will likely be a deciding factor in the decision.

Citigroup, on the other hand, argued that a credibility-driven rate hike would be difficult to justify, given market-based inflation expectations have fallen to low levels.