The S&P/ASX 200 index retreated 0.2% to 7,316.8 points by 0017 GMT. The benchmark closed 0.6% higher on Monday.
The Reserve Bank of Australia's (RBA) decision is expected to be followed by another hike next quarter, before pausing until next year, a Reuters poll found.
Analysts at ANZ wrote in a note that the focus of investors will be on any changes to the RBA's statement from last month.
"But the recent run of softer data won't be enough to dispel the RBA's concern that inflation expectations could become entrenched," analysts said.
Mining stocks slumped 1.6% on weak iron ore prices, with sector major BHP Group falling 2.1%. Rio Tinto said it had agreed to pay a $15 million civil penalty to settle an investigation by the U.S. Securities and Exchange Commission, relating to an alleged bribery scheme involving a consultant in Guinea. The global miner's shares dropped nearly 2%. Gold stocks tanked 1.6% after bullion dipped. Sector majors Newcrest Mining and Northern Star Resources shed 1.3% and 2.7%, respectively. Financial stocks advanced 0.5% with the "Big Four" banks posting gains, while energy stocks added 0.4%.
Australia's Megaport , which was the top loser in the benchmark index, dropped as much as 12.5% after Chief Executive Officer Vincent English tendered his resignation.
Funeral services provider InvoCare surged as much as 39.1% after it received a non-binding takeover offer from asset manager TPG Global LLC for A$1.81 billion ($1.22 billion) becoming the top gainer in the benchmark index.
New Zealand's benchmark S&P/NZX 50 index retreated 0.2% to 11,890.28 points.
(Reporting by John Biju in Bengaluru; Editing by Sherry
Jacob-Phillips)
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