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 The Fed will announce the outcome of its policy meeting at 2 p.m. ET
(1900 GMT), followed by a press conference by Chair Janet Yellen at
2:30 p.m. ET.
An increase in the Fed's benchmark rate, from near zero, would be
the first since June 29, 2006.
After more than a year of posturing and a couple of false starts,
the U.S. central bank is seen raising rates by a token 25 basis
points.
Traders see an 81.4 percent chance of a rate hike, according to the
CME Group's FedWatch tool.
The Fed is expected to move gradually on subsequent rate hikes after
the initial liftoff, according to a Reuters poll. That will help
soothe jittery markets, which have been roiled recently by a rout in
crude oil prices and a fall in the Chinese yuan.
"I think there is a chance that accompanying the interest rate hike
is going to be some very dovish commentary with regard to 'Yes, we
want to move off zero, but we're not going to expedite the
tightening cycle'," said Mark Luschini, chief investment strategist
at Janney Montgomery Scott in Philadelphia.
"That is bringing some certainty into the market and I think
investors welcome that."
Dow e-minis were up 81 points, or 0.46 percent, with 26,067
contracts changing hands at 7:26 a.m. ET. S&P 500 e-minis were up 8
points, or 0.39 percent, with 175,061 contracts traded. Nasdaq 100
e-minis were up 17.75 points, or 0.39 percent, on volume of 24,357
contracts.
Higher interest rates make loans more expensive, crimping profit
margins. Banks, however, will benefit from a rise in rates.
The rate hike will be a highly symbolic move, coming exactly seven
years to the day, since the Fed cut rates to zero as the financial
crisis engulfed the world.
Since then, the U.S. stock market has staged a spectacular bull-run,
with the S&P 500 index more than doubling and the Nasdaq composite
briefly breaching its dotcom boom highs.
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The Fed has said it would raise rates when it sees a sustained
recovery in the economy. While the unemployment rate has fallen to
multi-year lows, inflation remains stuck below the Fed's 2 percent
target.
U.S. stocks rose broadly on Tuesday, helped by a rally in the
financials and energy sectors, but ended far off their session
highs.
"We expect the start of policy normalization to serve as a catalyst
for normalization of the investment environment," Mike O'Rourke,
chief market strategist at Jones Trading, said in a note, adding
that the prolonged period of extremely accommodative monetary policy
has distorted investment objectives.
Dow component Disney shares were up 1.9 percent at $114.30 in
premarket trading as the newest installment of "Star Wars" hit
screens worldwide.
Honeywell was up 3 percent at $101.47 after the company reaffirmed
its full-year outlook.
(Reporting by Tanya Agrawal and Abhiram Nandakumar; Editing by Anil
D'Silva)
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