Investing.com - European stock markets are expected to open higher Wednesday, as investors digest a slowing in U.K. inflation ahead of the latest monetary policy decision by the U.S. Federal Reserve.
U.K. headline inflation retreats in August
Higher energy prices had been expected to prompt a jump to 7.0%, and while the Bank of England is still widely expected to announce another 25-basis-point increase in interest rates when it meets on Thursday, slowing growth could mean that the U.K. central bank also signals that the end of its rate-hiking cycle is not far away.
Fed rate decision looms large
However, attention Wednesday is more likely to be on the U.S. Federal Reserve , which completes its two-day policy-setting meeting later in the session.
The U.S. central bank is widely expected to keep interest rates steady at a range of 5.25% to 5.50% after raising them at 11 of its past 12 meetings in a bid to cool inflation.
But uncertainty reigns over what the Fed will do in following meetings this year, especially as rising energy prices threaten to lead to an unwelcome return of elevated inflation.
The People’s Bank of China , earlier Wednesday, held its benchmark loan prime rates at record lows, as it attempted to strike a balance between supporting an economic recovery and stemming further weakness in the yuan.
Crude falls despite large U.S. drawdown
Oil prices fell Wednesday, retreating from 10-month highs, as markets digested a forecast of a large drawdown in U.S. crude inventories ahead of the Federal Reserve interest rate decision.
Data from the industry body American Petroleum Institute , released on Tuesday, indicated that U.S. crude inventories fell by over 5 million barrels last week. The official data is due later on Wednesday.
Yet, despite this hefty draw, traders are taking some profit ahead of the crucial Fed decision after worries of a substantial supply deficit this year had sent prices soaring to their highest levels since November last year.
By 02:00 ET, the U.S. crude futures traded 0.9% lower at $89.67 a barrel, while the Brent contract dropped 1% to $93.42.
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