Stocks rise, dollar falls before Fed rate decision Fed likely to leave rates near zero Thursday -Reuters poll
* Two-year U.S. note yields touch fresh 4-1/2 year high (Updates market action, changes dateline, previous LONDON)
By Richard Leong
NEW YORK, Sept 16 (Reuters) - Global stock prices rose for a second day on Wednesday as investors awaited whether the U.S. Federal Reserve would raise interest rates, while the dollar fell on a surprise fall in domestic inflation in August.
Short-term U.S. bond yields retreated from a near 4-1/2 year high and gold prices rose as a 0.1 percent fall in the Consumer Price Index in August reduced expectations the U.S. central bank would raise interest rates for the first time since 2006.
Brent crude prices in London jumped 4 percent on a drop in U.S. crude inventories in the latest week.
"Hopes for a Fed rate hike Thursday grew a bit slimmer after another tame reading of U.S. inflation," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
Subdued domestic inflation is seen as a critical factor among some economists, together with the recent global market turbulence, that could cause the Fed to stick to its near-zero interest rate policy at its two-day meeting when it ends on Thursday.
Steady jobs growth and falling unemployment, on the other hand, might be enough to tip U.S. policymakers to raise rates.
A Reuters poll released on Wednesday suggested a rate hike remains a close call, although a little more than half the 80 economists surveyed reckoned the Fed will refrain from raising rates.
U.S. money market rates, however, implied traders see a little more than a 1 in 4 chance of a rate increase on Thursday.