US markets closed higher on Monday ahead of a big week for central banks around the world, vaulting the S&P 500 to its highest level in more than a year.

The benchmark index rose 0.9 percent to 4,338 and its highest close since April 2022. The Dow Jones Industrial Average gained 0.6 percent to 34,066, and the Nasdaq composite rallied 1.5 percent to 13,461.

The US stock market has been cruising on hopes the economy may avoid a recession and the Federal Reserve may soon take it easier on its hikes to interest rates. Traders are betting the Fed will hold rates steady at its next meeting, which concludes on Wednesday. That would be the first time it hasn't hiked rates at a meeting in more than a year.

Investors see high-growth stocks as some of the biggest beneficiaries of lower rates, and they led the market Monday. Tech stocks alone accounted for more than half the S&P 500's gain, powered by gains of at least 1.5 percent for both Microsoft and Apple.

A halt or a pause by the Fed to rate hikes would give the economy and financial markets some breathing room. The Fed has already pulled rates to their highest level since 2007 in hopes of driving down inflation, and the increases have helped cause high-profile US bank failures and a months-long contraction in the manufacturing industry.

This week will also see the latest updates on inflation across the economy. On Tuesday, economists expect a report to show prices for consumers were 4.1 percent higher in May. That’s way above the Fed's target of 2 percent inflation, but it would be down from 4.9 percent in April and a peak of more than 9 percent last June.

“While incoming data point to resilience in activity and stickiness in inflation, the Fed appears to want additional time to monitor policy lags and regional bank stress,” Michael Gapen and other economists wrote in a BofA Global Research report.

They see a June pause by the Fed as a close call. Recent surprise hikes by central banks in Canada and Australia show a move higher could still happen, but Gapen said the Fed doesn’t usually hike rates when the widespread assumption on Wall Street is for a hold. That may change if Tuesday's inflation report comes in hotter than expected.

Besides the Federal Reserve, central banks in Europe and Japan will also be meeting this week on interest rates. (AP)