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The U.S. central bank is expected to maintain its key rate in the range of 5.25%-5.50% at 2 p.m. ET, but the focus will be on projections and Chair Jerome Powell’s comments for clues on the outlook for rates and inflation.
Recent economic data has signaled an easing in core inflation, fuelling bets of a likely peak in interest rates, but surging oil prices have left a print on the headline inflation figures, paving the way for the Fed to project higher-for-longer rates.
“The Fed’s updated projections are likely to show one more hike in 2023, higher growth in 2023/24 but with the aim to stabilize inflation,” said Gabriele Foà, Portfolio Manager at Algebris Investments.
Uncertainty around the rates trajectory and any impact on the economy sparked a selloff on Tuesday, exacerbated by a jump in Canada’s inflation rate on higher gasoline prices, and a bigger-than-expected plunge in U.S. housing starts.
“In the near future, we think economic weakness will take a more central role in the market narrative,” Foà said.
Financial markets have priced in a 99% chance that the Fed will leave rates unchanged and a 69% likelihood of standing pat in November, according to CME’s FedWatch tool.
Investors were also looking forward to the debut by marketing automation company Klaviyo on the New York Stock Exchange against the backdrop of the recent successful U.S. listings.
Klaviyo had secured a valuation of $9.2 billion in its initial public offering after pricing the share sale above its indicated range.
Instacart shares lost 3.9% in premarket trading after ending 12% higher in their Nasdaq debut on Tuesday, while Arm Holdings (NASDAQ:ARM) shed 1.4%.
At 5:24 a.m. ET, Dow e-minis were up 48 points, or 0.14%, S&P 500 e-minis were up 6.5 points, or 0.14%, and Nasdaq 100 e-minis were up 22.75 points, or 0.15%.
A pullback in U.S. Treasury yields from their 2007 highs helped megacap growth stocks notch gains, with Alphabet (NASDAQ:GOOGL), Amazon.com (NASDAQ:AMZN) and Tesla (NASDAQ:TSLA) rising between 0.2% and 0.3%, respectively.
Dollar General (NYSE:DG) fell 2.2% after J.P.Morgan downgraded the discount store operator to “underweight”.
