Japan's Nikkei 225, South Korea's KOSPI, other Asian indices subdued ahead of US inflation data, Fed minutes

Asian equities inched lower on Wednesday ahead of a crucial U.S. inflation report that will likely influence the Federal Reserve's monetary policy path, with markets wagering another hike in interest rates at the central bank's next meeting.

MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was 0.17% lower in choppy trading. Japan's Nikkei (.N225) was 0.49% higher, while Australia's S&P/ASX 200 index (.AXJO) rose 0.65%.

China shares were mixed at the open, with the Shanghai Composite Index (.SSEC) up 0.1% while Hong Kong's Hang Seng Index (.HSI) lost 0.02%. Data on Tuesday showed China's consumer inflation in March was at its slowest since September 2021.

After Friday's jobs report showed a resilient US labour market, emboldening bets of a 25 basis point hike at the Fed's next meeting in May, investor attention is firmly on the March inflation report due later in the day.

The consumer price index is expected to show core inflation rose 0.4 per cent monthly and 5.6 per cent year-over-year in March, according to a Reuters poll of economists.

Markets are now pricing in a 66 per cent% chance of the Fed raising interest rates by 25 basis points in May and then pausing for the subsequent meetings, according to the CME FedWatch tool.

The Fed last month raised interest rates by a quarter of a percentage point, taking it to a range of 4.75 per cent to 5 per cent.

The turmoil in the banking sector had spurred some expectations that the Fed may need to cut interest rates to alleviate some of the stress in the market but a sticky inflationary environment is unlikely to give the Fed much room.

The International Monetary Fund warned on Tuesday that lurking financial system vulnerabilities could erupt into a new crisis and slam global growth this year as it lowered its 2023 global growth forecasts.

In the currency market, the dollar index , which measures the U.S. currency against six rivals fell 0.049%. The euro was up 0.12% at $1.0923, while sterling was last trading at $1.2431, up 0.06% on the day.