UK stocks edge higher as oil retreats; Fed verdict in focus

Sept 16 (Reuters) - London shares inched higher on Wednesday as oil retreated, while traders awaited the key U.S. Federal Reserve decision on interest rate hikes due later this day.

The blue-chip FTSE 100 index .FTSE rose 0.34% to 10,692.21 points by 0926 GMT, while the midcap FTSE 250 .FTMC climbed 0.46%.

• Oil prices retreated after a two-day rally after reports of additional Saudi crude cargoes via Oman eased Middle East supply concerns. O/R

• Homebuilders .FTNMX402020 rallied 4.4%, led by Barratt Redrow BTRW.L, which gained 8.8%, after reporting stronger reservation rates, a robust order book and profit above forecasts.

• On the data front, British inflation accelerated to a five-month high of 3.1% in August, though price growth, excluding surging energy costs, remained stable, official figures showed.

• Investors are more focused on the Federal Reserve's decision on interest rate hikes later in the day, with traders pricing in a 92% chance of a 25-basis-point hike, according to the CME's FedWatch tool.

• Meanwhile, the Bank of England is slated to announce its rate decision tomorrow. Traders expect the BoE to hold interest rates steady at this meeting but still see at least a 43.9-basis-point rise priced in by year-end, according to LSEG-compiled data.

• "Near term, AI and oil jitters may help FTSE100, and while domestic macro is tricky, valuations offer cushion,​‌", Barclays analysts said in a note as the index is up 7.6% this year, in line with the STOXX, even after a recent pull-back as bond yields and oil prices surged.

• Rate-sensitive heavyweight banks .FTNMX301010 gained 1.6% with HSBC HSBA.L rising 1.3% and Standard Chartered STAN.L adding 2.2%.

• Unilever ULVR.L shed 1.4% after UK competition regulators launched a competition probe into its proposed merger with McCormick MKC.N.

• Among mid-caps, greeting card retailer Moonpig MOONM.L fell 5.8% despite maintaining its annual outlook, with analysts pointing to consumer spending concerns and profit-taking.

($1 = 0.7425 pounds)