World stock indexes and the US dollar eased yesterday ahead the US Federal Reserve’s statement and expected interest rate increase, with investors bracing for what the central bank may signal about future hikes.

Expectations that the Fed would take a cautious stance on its rate outlook caused investors to take profits in the dollar, which has gained nearly four per cent between the Nov. 8 US election and last Friday.

The Fed is widely predicted to lift interest rates 25 basis points to 0.50-0.75 per cent, which would be its first rate hike in a year and its second since the financial crisis.   Investors will be examining the central bank’s statement and economic forecasts for any signs of how policymakers think President-elect Donald Trump’s election affects the outlook for growth and inflation.

Some analysts said the dollar’s weakness showed a bias among market participants that the Fed also may hint at financial conditions having already tightened, given the surge in US Treasury yields and rally in the dollar in the wake of the Nov. 8 election.

The challenge for the central bank may be how to signal further rate increases without triggering strong gains in the dollar that could undermine growth.

The dollar index, which measures the greenback against a basket of six major currencies, was last down 0.3 per cent at 100.770 .

US stocks edged lower following Tuesday’s rally to all-time highs, led by losses in energy shares.

The Dow Jones industrial average fell 34.59 points, or 0.17 percent, to 19,876.62, the S&P 500  lost 5.94 points, or 0.261476 per cent, to 2,265.78 and the Nasdaq Composite dropped 6.86 points, or 0.13 per cent, to 5,456.97.

MSCI’s all-country world stock index  was down 0.2 per cent, the pan-European STOXX 600 share index  ended down 0.5 per cent.

Treasuries have already priced in a rate hike and more. Yields on longer-dated US Treasuries touched session lows early as weaker-than-forecast rise in retail sales in November reduced expectations of a pickup in US consumer spending in the fourth quarter.

The benchmark 10-year Treasury yield fell to a session low of 2.426 per cent. It was last at 2.437 per cent, down four basis points from late on Tuesday, according to Reuters data.

In contrast to the Fed, the European Central Bank only last week extended its asset-buying campaign and moved to purchase more short-term debt.