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European stocks and Wall Street futures were higher on Wednesday, hours after the Federal Reserve was widely expected to keep policy rates on hold and released its latest forecast for short-term interest rates.

The Stoxx Europe 600 index across the region was up 0.3% in early trading. UK inflation fell to 6.7% in August from 6.8% in July, with London’s FTSE 100 rising 0.6%, surprising economists ahead of the Bank of England’s key interest rate decision on Thursday.

Property developers were the main beneficiaries: Taylor Wimpey and Persimmon rose 5% and 4.7% respectively, and British Land rose 4.6%. In early trading, the pound fell 0.4% against the dollar to $1.2339, its lowest level since May.

In the United States, contracts tracking Wall Street’s benchmark S&P 500 and the tech-heavy Nasdaq 100 both rose 0.1% as investors awaited the Federal Reserve’s latest monetary policy announcement.

Markets see a 99% chance of rates remaining unchanged on Wednesday, according to data compiled by Refinitiv based on interest rate derivatives prices.

Since the Fed’s last meeting in July, core inflation has fallen from 4.8% to 4.3%, non-farm employment growth has slowed, and the unemployment rate has edged up to 3.8%.

The main question for investors is whether the Fed, led by Chairman Jerome Powell, will be willing to raise interest rates again before shifting policy toward cuts.

JPMorgan analysts said: “We believe the message ‘additional policy tightening may be appropriate’ is likely to be retained verbatim as the July minutes confirmed ‘most participants continue to see significant upside risks to inflation’ .”

Liz Ann Sonders, chief investment strategist at Charles Schwab, said she expected Powell “to leave the door open to further rate hikes as he has in the past, reinforcing the view that the Fed wants “Take time to assess, if deflation continues, it is likely to stick.”

Sanders said: “The lesson Powell learned most seriously from the experience of the 1970s was to declare victory and implement policy easing, only to see the inflation genie re-emerge from the lights, which means that (former Fed Chairman Paul Volcker) must raise interest rates again.”

Compared with the 1970s, when successive oil price shocks led to a second wave of inflation, Brent crude oil prices have risen 30% in the past two months to around $95 a barrel, their highest point this year, so have took on new meaning. .

U.S. Treasury yields fell on Wednesday, after hitting 16-year highs in the previous session. The benchmark 10-year Treasury yield hit its highest level since November 2007 on Tuesday, falling 0.01 percentage point to 4.35%. Yield is inversely proportional to price.

Asian stock markets fell, with China’s CSI 300 Index falling 0.4%, Japan’s Topix Index falling 1%, and Hong Kong’s Hang Seng Index falling 0.5%.

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