(Reuters) - A look at the day ahead in U.S. and global markets by markets correspondent Naomi Rovnick

What a difference half a year makes. Traders started 2024 convinced that the U.S. Federal Reserve would be able to cut interest rates up to seven times by December.

Analysts now widely expect Fed officials not only to keep the funds rate at its 23-year high of 5.25% to 5.5% at the end of their monetary policy meeting on Wednesday, but also to project just one or two rate cuts this year, down from three.

U.S. inflation data is due just hours before the Fed's meeting ends and economists polled by Reuters forecast that consumer prices excluding food and energy rose 3.5% in May, down only slightly from April's 3.6% increase.

Wall Street, for now, is rallying on regardless. Futures markets signal a steady start for U.S. stock markets at the open.

Relentless interest in artificial intelligence drove the S&P 500 and the tech-focused Nasdaq to records on Tuesday, as Apple shares surged after it unveiled new AI features for its devices. Treasuries are also in vogue. The benchmark 10-year yield, at about 4.4%, is heading for its second week of declines.

Big investors are guessing that the Fed has underestimated prospects of a U.S. slowdown and may commit a policy error by keeping rates high for too long, sparking a recession.

Such speculation is nothing new, often wrong and leaves markets vulnerable to Fed officials releasing a hawkish dot plot later in the day if Chair Jerome Powell's commentary on the economic outlook is also surprisingly upbeat.

The U.S. economy is showing signs of softening but its companies created far more jobs than analysts expected last month as wage growth accelerated.

Elsewhere in markets, the euro is near a 22-month low against sterling because of jitters about gains for the far right in the recent European Parliament elections, as polls suggested France's National Rally could win a snap vote called by President Emmanuel Macron.

Key developments that should provide more direction to U.S. markets later on Wednesday:

* US CPI

* Federal Reserve meeting

(Editing by Bernadette Baum)