Asian markets experienced a mixed day on Wednesday as investors awaited the highly anticipated US interest rate cut, expected to be announced later in the day. The Federal Reserve’s decision and subsequent comments from Chairman Jerome Powell have been eagerly anticipated, with traders taking a cautious approach after a recent global rally lifted several indexes to record highs.

While a 25-basis-point reduction has been largely factored into valuations, the main point of contention revolves around the potential for future cuts and their magnitude. Recent US labor market data has sparked concerns about the economy’s health, despite inflation remaining above the Fed’s 2% target. The impact of President Donald Trump’s tariff war has not yet fully materialized, but economists expect divisions among decision-makers as they navigate the delicate balance between curbing inflation and supporting job growth.

KPMG chief economist Diane Swonk noted that the current economic picture, characterized by sluggish growth and rising prices, is a “stagflation reality.” This sentiment is shared by many, who worry about both inflation and the possibility of a recession. Tuesday’s data showing a significant surge in US retail sales did little to dampen optimism for potential rate cuts.

Asian traders remained cautious, with Tokyo and Hong Kong posting gains, while Seoul, Shanghai, Sydney, Singapore, Wellington, and Taipei experienced losses. eToro market analyst Josh Gilbert observed that markets are in a “holding pattern” ahead of the Federal Reserve’s decision, with the biggest risk being that the Fed may sound less dovish than expected.

Gold prices hovered near their record high, while the impact of Trump’s tariffs on Japan was evident in the country’s export data, which showed a 14% plunge in exports to the US last month. The decline included a significant drop in auto shipments, a crucial driver of Japan’s economy. As investors await the Federal Reserve’s decision, the global economy remains in a state of uncertainty, with the potential for further rate cuts and their implications for international trade and economic growth. Key figures at around 0230 GMT included the Nikkei 225 up 0.2% at 44,995.79 and the Hang Seng Index up 0.7% at 26,619.45.