Warsh Expected to Hike Rates Amid Oil Price Surge

Federal Reserve Chair Kevin Warsh is expected to hike interest rates at this week's meeting, according to traders who have increased their probability of a rate increase from below 10% to 36%. This comes as renewed fighting between Iran and the United States has pushed crude oil above $100 a barrel, raising fears that energy costs will feed into inflation.

The meeting starts on Tuesday and is Kevin's second as Fed chair. Investors now fully expect one rate increase by September and anticipate one or two more quarter-point hikes within nine months. The 10-year U.S. Treasury yield reached its highest point in 18 months, while yields in Germany and France climbed to levels not seen in more than 15 years.

The robust labor market and high oil prices have added to the reasons for a rate hike. Consumer inflation decreased to 3.5% in June, but is still above the Fed's target of 2%. Kevin has been tight-lipped about his views, preferring not to provide explicit clues before making judgments.