Benchmark indexes traded lower at the open in Japan and Australia. Futures for equities in Hong Kong slipped and contracts for US stocks were flat in Asia trading on Wednesday after the S&P 500 closed down though off session lows.

In a sign of further headwinds facing Asian markets, US-listed Chinese stocks fell the most in nearly two weeks on Tuesday. Brent remained firm above $94 per barrel, posing inflation concerns.

Australian and New Zealand bond yields ticked higher, mirroring the moves in both the five- and 10-year Treasury yields which hit the highest levels since 2007 on Tuesday. Treasuries steadied during Asian trading, as did the dollar.

The yen rose from its near 10-month low after US Treasury Secretary Janet Yellen said any intervention by Japan to support its currency would be understandable if it were aimed to smooth out volatility. Trade data that showed Japan’s deficit widened in August yielded little response.

Fed Chair Jerome Powell and his colleagues are widely expected to hold rates on Wednesday. Still, supply shocks such as climbing oil prices present the central bank with a quandary as they simultaneously boost inflation and curb economic growth. Surging energy costs played a role in tipping the US into recession in the mid-1970s, as well as the early 1980s and 1990s.

Aside from expectations of a hawkish hold, investors will focus on the Fed’s updated quarterly rate projections — known as the dot plot — that will be released at the conclusion of the policy meeting. High on the watchlist will be whether these forecasts continue to reveal a median view for one more quarter-point hike this year and whether forecasts for 2024 scale back the 100 basis points of rate reductions that officials foresaw in June.

“Going into 2024 to really get inflation back to that 2% target, the Fed is at least going to have to hold for an extended period of time rather than cut,” Kathryn Rooney Vera, chief market strategist at StoneX, said on Bloomberg Television. “The dollar probably has a bit more upside.”

In Asia, China’s commercial banks are likely to lower prime rates on short-term loans for a second month in a row, while holding five-year rates steady, according to Eric Zhu at Bloomberg Economics. On the five-year benchmark, “other moves to support the housing market, including a recent expansion of first-home buyer benefits, make cutting the home loan benchmark less urgent,” Zhu wrote in a note.