At noon AEST on Wednesday, the benchmark S&P/ASX200 index was down 52.9 points, or 0.68 per cent, to 7,702.5, while the broader All Ordinaries had fallen 53.8 points, or 0.67 per cent, to 7,952.1.
Wednesday night AEST the US Bureau of Labor Statistics will release the latest consumer price index data, which will be closely watched after the US inflation readout for April came in softer than expected.
"Inflation remains top of mind for market participants," Saxo head of FX strategy Charu Chanana said.
The Fed wants to see confirmation that disinflation is progressing to give it confidence that it can cut rates this year, Ms Chanana said.
Hours later, the Fed's Federal Open Market Committee is universally expected to announce it is leaving interest rates unchanged when its latest meeting wraps up during Australia's pre-dawn hours on Thursday.
But its "dot plot" projections on when rate cuts might begin and how many are expected in 2024 will be highly anticipated.
Blerina Uruçi, chief US economist at T. Rowe Price, said the "dot plots" would be a close call for many FOMC participants given the resilience of the US labour market.
"For this reason, I think that risks are skewed in a hawkish direction (i.e the dot plot could have only one cut this year)," Ms Uruçi wrote. "An upside surprise to the CPI data would further increase the odds of a hawkish surprise."
At midday the ASX's health care sector was the biggest loser, down 1.1 per cent, followed by consumer discretionaries, which had collectively fallen 1.0 per cent.
Wesfarmers was down 1.8 per cent and CSL had dropped 1.5 per cent.
In the heavyweight mining sector, BHP had dipped 1.1 per cent, Fortescue had slid 1.1 per cent and Rio Tinto had fallen 1.5 per cent.
All of the Big Four banks were lower, with CBA down 1.1 per cent, NAB drooping 0.8 per cent, ANZ dipping 0.3 per cent and Westpac edging 0.1 per cnet lower.
The energy sector was up 1.1 per cent as Brent crude rebounded to a two-week high of $US82 on a drop in US inventories. Woodside had gained 2.3 per cent and Santos had added 1.1 per cent.
But Deep Yellow was the biggest loser in the ASX200, falling 6.2 per cent, followed by another uranium producer. Boss Energy was down 5.6 per cent.
The Australian dollar was buying 66.13 US cents, down from 66.08 US cents at Tuesday's ASX close.
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