Fed Rate Hike Looms as Global Markets Rise Ahead of Key Decision

Global stock markets rose on Wednesday as oil prices dipped ahead of the Federal Reserve's decision on US interest rates. The central bank is widely expected to increase borrowing costs for the first time since 2023, a move that would support the dollar and potentially anger President Donald Trump.

The Fed's decision comes as inflation continues to run above target, with government bond yields reaching multi-decade highs in recent weeks. The yield on the 10-year US Treasury note climbed above five percent this week, a level not seen since 2007.

Lale Akoner, Global market strategist at eToro, said that a Fed rate hike is already priced into the markets, but noted that policy guidance could be the bigger catalyst for the decision. If the Fed fails to hike or sounds less hawkish than expected, Kathleen Brooks of XTB warned that it would not be good for bonds and would instead boost gold.

Crude prices have spiked around 20 percent this month due to the US-Iran conflict and pipeline disruptions in Saudi Arabia. The market is pricing in another rate increase by the end of the year, with Deutsche Bank's Jim Reid saying that forward-looking indicators suggest inflation will persist for some time.