Wall Street saw only minor movements in the run-up to the Federal Reserve decision, with disappointing inflation data reinforcing speculation that policymakers will be slow to declare victory.

While markets remain confident that officials will remain on hold on Wednesday, the latest data calls into question the aggressive pricing of a dovish pivot. Traders have slightly reduced their bets on rate cuts in 2024, with the first still expected in May. The data also fueled speculation that Fed Chairman Jerome Powell will try to deflate the Fed's easing buoyancy.

Following the last Fed decision, Powell reminded investors that inflation will "come in lumps and be bumpy." The fact that Tuesday's consumer price index was roughly in line with expectations - and ticked up slightly - highlighted the choppy nature of returning prices to the 2% target, particularly in the service sector, which the Fed has targeted as the final mile in its inflation fight.

After spiking in the aftermath of the CPI report, two-year yields have stabilised above 4.7%. Long-term Treasuries rose slightly after a $21 billion sale of 30-year bonds drew strong demand. The S&P 500 rose marginally to its highest level since January 2022. The VIX, Wall Street's "fear gauge," fell to a four-year low.