GLOBAL MARKETS-Stocks flat, dollar edges higher as investors await Fed rate decision

By Dhara Ranasinghe and Chibuike Oguh

NEW YORK/LONDON, Sept 17 (Reuters) - World stocks traded flat while the U.S. dollar was marginally higher on Wednesday as investors eyed a widely anticipated Federal Reserve interest rate cut taking place against a backdrop of some drama that raises questions about the central bank's independence.

The Fed is expected to cut interest rates by a quarter of a percentage point to the 4.00%-4.25% range later on Wednesday, with the focus on any comments from Fed Chair Jerome Powell on the outlook for monetary policy.

On Wall Street, the benchmark S&P 500 was a shade lower, the Nasdaq was down and the Dow rose, with consumer staples and financials leading gains. Technology and consumer discretionary stocks were losing ground.

The Dow Jones Industrial Average .DJI rose 0.53% to 46,000.09, the S&P 500 .SPX fell 0.09% to 6,600.78 and the Nasdaq Composite .IXIC fell 0.36% to 22,254.15.

European shares .STOXX was up 0.2%, while Japan's blue-chip Nikkei index .N225 pulled back from record highs.

"It's pretty much a done deal this notion of a 25-basis-point cut from the Fed and if we do get that, there's an argument that we might not get much movement in the stock and bond markets because it's broadly expected and priced in," said Talley Leger, chief market strategist at The Wealth Consulting Group.

The September meeting also takes place under unusual circumstances - Steven Miran, on leave from the Trump administration, has joined the Fed board while Fed governor Lisa Cook has so far fought off efforts by President Donald Trump to oust her.

"Given the pretty alarming downward revision to payrolls ... that's a big warning shot across the Fed's bowels so I wouldn't be surprised that we kind of err on the side of some dovishness with the cut," Leger said.

The dollar index =USD, which tracks the dollar against a basket of currencies of major trading partners, edged up 0.06% after falling on Tuesday to the lowest since early July.

The euro EUR= slipped 0.09% to $1.1856, after touching $1.1867 on Tuesday, its highest level since September 2021. But the dollar was a touch softer at around 146.24 yen against the yen JPY=EBS and was flat at 0.78585 against the Swiss franc CHF=EBS

Money markets price in almost 70 bps of Fed easing by year-end.

MSCI's All-Country Index was down 0.04% at 976.39, just below Monday's record highs .MIWD00000PUS. In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed rose 0.46%, buoyed by signs of progress of a deal to allow the Chinese-owned social media platform TikTok to keep operating in the U.S.

The Bank of Canada cut rates on Wednesday to contend with a flagging labor market and trade frictions.

In Europe, data showing UK inflation holding at 3.8% in August reinforced expectations for no rate change at Thursday's Bank of England meeting.

Sterling rose 0.14% to $1.3666 GBP=D3.

Brent crude futures LCOc1 were last up 0.01%, to $67.49 a barrel, while U.S. West Texas Intermediate crude futures CLc1 was flat at $64.52.

Spot gold XAU= fell 0.28% to $3,679.08 an ounce, after the yellow metal crossed $3,700 for the first time in the previous session.