U.S. equity futures moved higher Wednesday, while the dollar slipped back against its global peers and Treasury bond yields steadied as markets hunkered down ahead of the Federal Reserve’s key rate decision later in the session.

Traders expect the Fed to hold its benchmark lending rate steady at between 5.25% and 5.5% when the Open Markets’ Committee reveals its decision at 2:00 pm Eastern time, with all eyes then shifting to the central bank’s new economic projections, also known as the ‘dot plots’ and Chairman Jerome Powell’s question-and-answer session with the media thirty minutes later. 

Key to the new projections will be the Fed’s forecasts for core inflation, which were last pegged at 3.9% in the June dot plots, and any suggestion that the current surge in oil prices will filter through to core price pressures in the form of higher airfares and transport costs. 

Oil prices were somewhat softer in overnight trading, but still near the highest levels in more than ten months ahead of the Energy Department’s weekly update on domestic stockpiles and production rates at 10:30 am Eastern time.

Brent crude contracts for November delivery, the global pricing benchmark, were last seen 60 cents lower at $93.70 per barrel while WTI contracts for October were marked 62 cents lower at $89.86 per barrel.

At present, markets are pricing in around a 33% chance the Fed will raise rates before the end of the year, either at its November or December meetings, with dovish signals from the European Central Bank last week, as well as a surprise dip in U.K. inflation last month ahead of Thursday’s Bank of England rate meeting, driving bets that markets have reached the peak of the rate-hiking cycle.

That said, Treasury bond yields remain elevated, with 2-year notes market at 5.075% in early New York dealing, some 28 basis points higher than when the Fed last hiked rates by a quarter of a percent in late July. 

Benchmark 10-year notes were also trading near 2007 highs of 4.351% heading into today’s decision, reflecting the market’s higher-for-longer rate reality as the economy continues to perform and labor markets remain tight.

The U.S. dollar index, meanwhile, was marked 0.18% lower at 105.014 in early trading, thanks to a pullback in the pound and softer euro.

Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 are indicating a modest 6 point opening bell gain, while those linked to the Dow Jones Industrial Average are priced for a 50 point move to the upside.

Futures tied to the tech-focused Nasdaq are indicating a 20 point gain, with higher Treasury yields holding down gains.

In Europe, the Stoxx 600 was marked 0.57% higher in Frankfurt, while fading Bank of England rate bets, linked to the surprise pullback in inflation, helped the FTSE 100 to a 0.74% gain in London.

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