MORNING BID-The calm before the possible Fed storm

A look at the day ahead from Saikat Chatterjee.

World markets held their breath before the conclusion of a two-day Federal Reserve policy meeting on Wednesday, where Jerome Powell and his colleagues could flag the pending start of talks about when and how to exit from policies introduced at the onset of the coronavirus pandemic last year.

European and U.S. stock futures treaded water while the usually frisky Australian dollar is set to notch up its lowest daily trading range so far this year before the Fed's decision. A gauge of U.S. stock market volatility remained firmly pinned near 2021 lows.

Key will be Fed members' projections, or dot plots, for interest rates and whether more now signal a hike in 2023. Previously only 7 out of 18 had seen such a move. There could also be some upward movement in inflation projections for this year.

The overnight slate of data also signalled a global economy firmly on the mend amid growing price pressures. Japan's exports rose at the fastest pace since 1980 in May while U.S. data showed wholesale price inflation accelerated to 6.6%, the largest gain since November 2010. British consumer price inflation jumped to 2.1% in May, above the Bank of England's 2.0% target and its highest since July 2019.

But bond investors remain sanguine about the prospect of a shift in policy thinking. Benchmark ten-year U.S. Treasury yields held a quarter of a percentage point below 2021 highs while the European Union raised 20 billion euros in ten-year debt yielding less than 0.1% amid near-record demand.

The only signs of investor nervousness were evident in the currency markets where the dollar held comfortably at a one-month high with cauious traders pushing the greenback higher in the backdrop of large short bets.

In corporate news, Swiss bank Credit Suisse has prepared its first insurance claims on losses stemming from its $10 billion of funds tied to collapsed finance group Greensill Capital, the Financial Times reported.

Key developments that should provide more direction to markets on Wednesday:

European Q1 wages, labour costs data

BOE's Mills, Patel at Central bank meeting

Spain economy minister Calvino at conference

Fed chief Powell press conference

U.S. President Biden to meet Russia's Putin in Geneva

(Reporting by Saikat Chatterjee Editing by Tommy Wilkes)