* Greenback on defense on bets Fed will keep dovish stand
* Fed seen paring view on growth, raise inflation outlook
* Sterling pares gains, BoE minutes reduce rate-hike bets (Updates trading, changes dateline, previous LONDON)
By Richard Leong
NEW YORK, June 18 (Reuters) - The dollar slipped against most major currencies on Wednesday on expectations the Federal Reserve is not prepared to increase interest rates within the next 12 months, despite signs domestic inflation is inching higher.
Sterling receded further from a five-year high against the greenback after minutes from the Bank of England’s recent policy meeting turned out less hawkish than expected, as its policymakers highlighted the need to increase rates gradually.
The Federal Open Market Committee, the U.S. central bank’s policy-setting group, will conclude a two-day meeting later Wednesday. It was widely expected to shave another $10 billion from its monthly bond purchases to $35 billion, but is unlikely to hint at any rate increases due to relatively high unemployment and inflation running below its 2 percent target.
“We are seeing a lot of caution ahead of the FOMC. We see some modest pressure on the dollar,” said Sireen Harajli, currency strategist at Mizuho Corporate Bank in New York.
The dollar index that gauges the greenback against the euro, yen and four other currencies dipped 0.14 percent to 80.508 , which was within the range established since hitting a four-month high earlier this month.
The dollar gave back Tuesday’s gains linked to data that showed U.S. consumer prices rising 0.4 percent in May, its fastest monthly pace in more than a year. The bigger-than-anticipated rise in the consumer price index had some traders raising bets that the Fed might be spurred to hike rates sooner than expected.
After the FOMC statement at 2:00 p.m. EDT (1800 GMT), traders will focus on Fed Chair Janet Yellen’s news conference at 2:30 p.m. (1830 GMT), where she is expected to damp expectations of an imminent rate rise.
“She will stay fairly dovish,” Harajli said.
A recent Reuters poll found a majority of Wall Street’s top bond firms do not see the Fed raising rates before the second half of next year.
Earlier, the Bank of England released minutes from its June 4-5 meeting, which showed members wanted to see more evidence of economic slack being absorbed before raising rates. That news weakened the pound against the dollar and the euro.
The tone of recent comments by policymakers, including BOE Governor Mark Carney last Thursday, had bolstered expectations that one of the committee members may have voted for an increase earlier this month.
“Given the lack of hawkish surprises, we could see some profit-taking on long sterling positions,” said Valentin Marinov, currency strategist at Citi in London.
Carney’s warning last week that markets were too hopeful about the chances of a 2014 hike had sent the pound soaring past $1.70 earlier this week for the first time since mid-2009.
Sterling last traded 0.12 percent lower at $1.6944, while the euro gained 0.28 percent against the pound to 80.09 pence. (Additional reporting by Anirban Nag in London; Editing by Bernadette Baum)