The FTSE 100 was called to open 34 points lower at 7,110, with the Bank of England’s latest rate announcement due at midday.
CMC Markets analyst Michael Hewson said: "Once the press conference got under way any expectation that slight change of tone would turn into a dovish pivot hit the wall quite hard.
"While Powell acknowledged that a slowdown in the size of rate rises was likely, it didn’t alter the fact that rates would probably still need to go much higher in order to get inflation back to target of 2% over time.
"This would seem to suggest that while we can expect to see a 50bps move at the December meeting, the eventual terminal rate could well be much higher than 4.5% and could be as high as 5%. This admission that rates might need to rise by more than expected saw the US dollar, and yields which had initially slipped back, reverse course sharply, rallying to the highs of the day, while stock markets fell sharply, closing the day just above the lows of the day.
"So, while the market got what it wanted in the context of expectations of smaller rate rises, they probably weren’t expecting that rates might need to go quite a lot higher, thus removing any prospect of an imminent pause, or even a rate cut much before the end of 2024."
On home shores, the BoE is widely expected to announce a 75-basis point hike later in the day - the biggest since 1992 and taking the base rate to 3%. This would be the highest level since the financial crisis in 2008.
In corporate news, supermarket chain Sainsbury's saw profits slump in the six months ended 17 September as cost-of-living pressures offset slightly improved revenues.
Sainsbury's said that statutory pre-tax profits had sunk 29% year-on-year to £376.0m, despite reporting a 4.4% increase in interim group revenues. Earnings per share fell 27% to 12.3p.
Rolls-Royce (LON:RR) held annual guidance as the rebound in post-pandemic air travel continued, with air engine hours flown at 65% of 2019 levels.
"The recent volatility in interest rates and foreign exchange rates have not had a material impact on our underlying cash flows or full-year 2022 group guidance, which is unchanged," the engine maker said, adding that it had also paid off £2bn in debt with proceeds from the sale of its ITP Aero unit.