The benchmark S&P/ASX200 index was down 10.1 points, or 0.14 per cent, to 7315.5 at noon AEDT on Tuesday. The broader All Ordinaries was down 15.3 points, or 0.2 per cent, to 7512.5.
The Reserve Bank is widely expected to hike the cash rate by another 25 basis points later on Tuesday, which would be the central bank's record eighth consecutive rate hike. Its decision is to be released at 2.30pm AEDT.
City Index senior market analyst Matt Simpson wrote in a client note that while he thought a 25 basis point hike was most likely, "we shouldn't discount the potential for a hold – which I'm sure consumers would love."
In the US, a monthly gauge of economic activity in the manufacturing sector known as the Purchasing Managers Index (PMI) came in stronger than expected, raising jitters overnight that the Fed might not ease its aggressive rate hiking campaign at its December 13-14 meeting.
The US dollar rebounded against other currencies, putting pressure on commodities like oil and gold .
The heavyweight mining sector was down 0.4 per cent, with Fortescue Metals dipping 0.9 per cent to $20.85, BHP basically flat at $46.89 and Rio Tinto up 0.6 per cent to $116.80.
Among goldminers, Northern Star had dropped 2.1 per cent, while Newcrest was down 1.9 per cent.
Coalminers were bouncing back from Monday's losses, with Whitehaven up 2.3 per cent and Yancoal adding 3.6 per cent.
Among the big banks, Westpac had added 0.5 per cent, NAB and CBA were both up 0.4 per cent and ANZ was flat, while Macquarie had dropped 1.7 per cent.
Tech was the worst performing sector at midday, falling 1.4 per cent. Afterpay owner Block was down five per cent and Xero had dropped 2.5 per cent.
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