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The
central bank is widely expected to hike the fed-funds rate by
half a percentage point to 4.25-4.50%. The decision will be
announced at 2 p.m. ET (1800 GMT) and will be followed by Chair
Jerome Powell's press conference.
Data on Tuesday showed that U.S. consumer prices grew at their
slowest pace in about a year in November, sparking an early
rally on Wall Street, with the S&P 500 jumping as much as 2.8%
to a three-month high.
The benchmark index, however, closed sharply off its high on
concerns over the central back remaining aggressive.
"This CPI release ultimately cements the case for a downshift in
the pace of Fed rate hikes on Wednesday," BCA Research said in a
note.
"Although it raises the odds of a pause in H1, labor market
dynamics remain too hot to call for rate cuts in the near term."
Strategists at Morgan Stanley are expecting the central bank to
increase rates by another 25 basis points at its February
meeting, but see no further increases in March, leaving the peak
fed-funds rate at 4.625%.
In contrast, money market participants are expecting two more 25
basis-point hikes next year, keeping the terminal rate at 4.82%
by May 2023.
At 6:06 a.m. ET, Dow e-minis were down 1 point, S&P 500 e-minis
were down 1.25 points, or 0.03%, and Nasdaq 100 e-minis were
down 10.75 points, or 0.09%.
Among stocks, Tesla Inc slipped 1% in premarket trading after a
Goldman Sachs analyst trimmed the price target for the electric
vehicle maker's stock.
(Reporting by Shubham Batra and Ankika Biswas in Bengaluru;
Editing by Anil D'Silva)
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