(BSS/AFP) - Asian stocks struggled Wednesday as investors prepare for an expected interest rate hike by the Federal Reserve later in the day, though there was a little support from a dip in oil prices following their recent run-up.

With inflation still running well above the central bank`s target and the Middle East crisis keeping crude above $100 a barrel, monetary policymakers are widely tipped to lift borrowing costs for the first time since 2023.

That has dealt a heavy blow to a rally in global equities that saw several markets hit record highs in the first half of the year, and there is growing speculation that officials could announce another lift before the end of the year.

Fed boss Kevin Warsh last month ramped up bets on an increase when he delivered what was considered a hawkish speech at a gathering of central bankers and economists at Jackson Hole, Wyoming.

Since then, data showing strong jobs creation and stubbornly high inflation have cemented expectations, with traders pricing a more than 90 percent chance board members choose to tighten monetary policy.

Expectations that inflation will run hot for an extended time helped push up 10-year US Treasury yields this week above five percent and to a level not seen since 2007 before the global financial crisis kicked in.

"For traders, the most interesting part of the statement will be the vote, specifically how many of the 12 members (if any) vote to leave interest rates unchanged," wrote Matt Weller at FOREX.com.

"If there are three or more dissents, or if Chairman Warsh himself dissents (unlikely), then even an immediate interest rate hike may be seen as a potential one-off `insurance hike`, rather than necessarily the start of a new rate hiking cycle.

"Conversely, a unanimous decision to raise rates makes another interest rate hike this year more likely."

After a sell-off on Wall Street and in Europe, Asian equities staggered between gains and losses Wednesday, with tech firms still coming to terms with a call among top AI leaders for a slowdown in development in the sector.

Tokyo, Shanghai, Sydney and Manila fell, while Hong Kong, Singapore, Wellington, Taipei and Jakarta fell.

Seoul was flat.

The Fed announcement is followed Friday by the Bank of Japan, which is also expected to hike owing to rising inflation as well as the need to maintain support for the yen.

The currency has picked up against the dollar this month -- having hit a 40-year low in July -- helped by a historic joint Japan-US intervention.

But observers say it could benefit in the future from Fed struggles to rein in prices.

"Currency markets are still pricing in a consensus that US inflation will ultimately return to two per cent," said Invesco`s David Chao.

"It is very possible that US inflation instead settles closer to three per cent.

"In such an environment where the central bank is seen as less credible in reigning in inflation, investors may become less willing to hold US dollars simply because US interest rates are higher."

The Bank of England is forecast to maintain its benchmark rate on Thursday as the UK economy struggles for growth.

A drop in oil prices Wednesday provided some optimism, though both main contracts remain well above $100 a barrel as the US and Iran remain at loggerheads and Saudi Arabia keeps a key pipeline closed following attacks.

Also in view, is a planned summit between US President Donald Trump and Chinese counterpart Xi Jinping, with reports that they could agree to some tariff reductions.

Bloomberg said the two sides were looking at reductions on some goods including US energy and agricultural products, suggesting they will extend a one-year truce agreed in 2025 following Trump`s global tariff blitz.

- Key figures at around 0230 GMT -

West Texas Intermediate: DOWN 0.8 percent at $104.94 per barrel

Brent North Sea Crude: DOWN 0.4 percent at $108.30 per barrel

Tokyo - Nikkei 225: DOWN 0.1 percent at 63,396.00 (break)

Hong Kong - Hang Seng Index: UP 0.1 percent at 24,678.75

Shanghai - Composite: DOWN 0.3 percent at 3,852.83

Dollar/yen: UP at 155.32 yen from 155.09 yen on Tuesday

Euro/dollar: DOWN at $1.1537 from $1.1542

Pound/dollar: DOWN at $1.3473 from $1.3477

Euro/pound: DOWN at 85.63 pence from 85.64 pence

New York - Dow: DOWN 0.6 percent at 52,093.11 (close)

London - FTSE 100: DOWN 0.4 percent at 10,658.13 (close)