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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 (NYSE:MS) 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 (NASDAQ:TSLA) Inc slipped 1% in premarket trading after a Goldman Sachs (NYSE:GS) analyst trimmed the price target for the electric vehicle maker’s stock.
