LONDON - Copper and aluminium prices fell on Wednesday as the threat of rising interest rates dampened the economic growth outlook, hammered global stock markets and held the dollar near 20-year highs.

Data on Tuesday showing higher-than-expected US inflation cemented expectations for a 75 basis points rate increase from the Federal Reserve next Wednesday, triggering a sell-off in risky, growth-linked assets that have already plunged in recent months. 

It also delivered the dollar its biggest one-day rise since March 2020, making dollar-priced metals costlier for buyers holding other currencies and putting pressure on other central banks to raise rates too. 

That pressure can be seen in China, the world's biggest metals consumer, where the central bank is expected to pause its monetary easing despite a weakening economy. Read full story

"Where's the growth?" said a trader in London, suggesting that metals prices may fall further.

"If the U.S. is raising rates faster than other countries, that will exert upward dollar pressure and all commodities priced in dollars will take a hit," said WisdomTree analyst Nitesh Shah.

Benchmark copper CMCU3 on the London Metal Exchange (LME) was down 0.7% at $7 811.50 a tonne at 1114 GMT and aluminium CMAL3 was down 2.5% at $2 254.50 a tonne. Both have fallen around 20% this year.

Adding pressure on aluminium was a rise in inventories in LME-registered warehouses to 345 600 tonnes from 276,050 tonnes at the start of September, which has eased supply concerns. 

But aluminium stocks remain far below typical levels.

Copper inventories, meanwhile, have been falling in exchange and Chinese bonded warehouses. 

Tight supply pushed the premium for quickly deliverable cash copper over the three-month LME contract as high as $150 a tonne, the most since November 2021.

In other metals, LME zinc CMZN3 was flat at $3 227.50 a tonne, nickel CMNI3 fell 0.8% to $24 200, lead CMPB3 rose 0.2% to $1 956.50 and tin CMSN3 was down 1.3% at $21 100.