U.S. stocks rose modestly at the open on Wednesday as investors braced for the Federal Reserve’s seventh and final rate hike in 2022.

The central bank is expected to hike by half a percentage point at the end of its two-day policy meeting at 2:00 PM ET. The hike is set to push its key federal funds rate to a new range of 4.25% to 4.5%, the highest level since December 2007.

The S&P 500 (^GSPC) and the Dow Jones Industrial Average (^DJI) each rose 0.2%. The technology-focused Nasdaq Composite ( ^IXIC ) rose about 0.1%. In other markets, US Treasuries fell after rising on Wednesday, while the US dollar index retreated. West Texas Crude Oil (WTI) oil futures rose 1% to $76 per barrel.

Investors will weigh in on Fed Chairman Jerome Powell’s remarks at 2:30 PM ET after the rate announcement. Policymakers’ economic forecasts and the latest dot plot showing each member’s forecast for US short-term interest rates will also provide guidance for investors on the Federal Reserve’s path forward.

The decision will follow Wednesday’s closely-watched November Consumer Price Index (CPI), which rose 7.1% year-on-year last month, the second straight drop surprise in inflation data. Stocks closed higher after the report, but Wall Street’s reaction was underwhelming, with uncertainty still ahead about how far they will have to go further to calm prices, which remain elevated.

While the drop in inflation on Wednesday was welcome, equity markets pared much of the gains that came shortly after the print as traders wondered: “What now?”

“The Fed is still going to focus on labor market imbalances, while companies and consumers need to reconsider the impact of higher interest rates and a slowing economy,” Ma added. . “It’s all a balancing act, which we think points to short-term volatile markets, although an improving inflation backdrop adds a positive bias.”

WASHINGTON, DC – NOVEMBER 30. U.S. Federal Reserve Chairman Jerome Powell speaks at the Brookings Institution Nov. 30, 2022, in Washington. Powell discussed the economic outlook, inflation and the labor market. (Photo by Drew Angerer/Getty Images)

That view was echoed by other Wall Street strategists, including Bank of America chief U.S. economist Michael Gapen, who noted that while the November consumer price report reflected a faster-than-expected correction in core inflation, services inflation remains sticky.

“It is unlikely to affect the Fed’s December decision. we continue to expect them to rise by 50 basis points, but that could lead to discussions of another decline in February,” Gapen said in a note with his team at BofA. “We still think they rise 50 basis points given the tight labor market and strong wage growth, but the debate should be more lively, especially if we get another soft December inflation report.”

This week marks perhaps the final week of major US economic events of the year for investors, with the government’s retail sales report also due for Thursday. Even as a jam-packed economic calendar keeps traders busy at home, traders will be watching the moves of central banks abroad, with policymakers from the Bank of England, Mexico, Norway, the Philippines, Switzerland and Taiwan all poised to implement their own. grade decisions on Thursday.

Great Britain received its own inflation index on Tuesday. The rapid rise in consumer prices slowed slightly to 10.7% in November last year from a 41-year high of 11.1% the previous month. UK stocks retreated as investors awaited news from the US Federal Reserve later today and a Bank of England rate decision on Thursday. The pound traded near its highest level since June.

On this side of the Atlantic, all eyes were also on the latest developments in the crypto world, with former CEO of cryptocurrency exchange FTX Sam Bankman-Fried facing a wave of criminal charges for handling client and investor assets.

On the corporate front, companies including Lennar ( LEN ), Trip.com ( TCOM ) and Weber ( WEBR ) are scheduled to report earnings on Wednesday.

Alexandra Semenova is a Yahoo Finance reporter. Follow him on Twitter @alexandraandnyc

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