The Stoxx Europe 600 index held a modest advance after a report showed inflation in the euro area slowed more than economists' expectations in January, suggesting heated debate to come at the European Central Bank over how much more interest rates must rise. The gauge closed January with a 6.7 per cent gain, the best start to a year since 2015.
The stellar rally has set equity markets up for a showdown with the Fed as traders position for a pivot which Chair Jerome Powell and his colleagues may not be ready to deliver. Wage cost data that undershot forecasts, a cooling housing market dwindling consumer confidence suggest the Fed's rate hikes over the past year have begun to curtail inflation, but still-loose financial conditions are complicating the central bank's task.
Treasury yields drifted lower and the dollar was steady before the Fed statement, where it's forecast to unveil a 25 basis point rate increase.
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