The FTSE 100 was down 0.3% at 7,161.38, having been steady earlier in the day, while the pound was up 0.2% against the dollar at 1.1509.
The Fed rate announcement is due after the close on Wednesday, while the BoE will announce its decision on Thursday. Both central banks are expected to raise rates by 75 basis points.
Russ Mould, investment director at AJ Bell, said: "All eyes will be on central banks on both sides of the Atlantic as both the US Federal Reserve and Bank of England get ready to deliver their rate decisions over the next 24 hours or so.
"While we have a good idea of the quantum of increase both parties will deliver, it will be all about the mood music. Investors are like thirsty travellers in the desert, hoping for even the tiniest drop of comfort to suggest the rate cycle may have run its course."
Investors were also digesting data from BRC and Nielsen, which showed that shop price inflation reached a fresh record high last month as the price of food continued to spike.
According to the latest BRC-Nielsen IQ Shop Price Index, shop price inflation reached 6.6% in October from 5.7% a month earlier. That was well above the three-month average of 5.5%, and the highest since the index began in 2005.
Within that, food inflation surged to 11.6% from 10.6% in September, the highest rate on record.
Fresh food saw the biggest prices hikes, with inflation at 13.3% against September’s 12.1%, while ambient food inflation rose to 9.4% from 8.6%.
Non-food inflation also hit a series high, however, rising to 4.1% from 3.3%.
Helen Dickinson, chief executive of the British Retail Consortium, said: "It has been a difficult month for consumers, who not only faced an increase in their energy bills, but also a more expensive shopping basket.
"Prices were pushed up by because of the significant input cost pressures faced by retailers due to rising commodity and energy prices and a tight labour market."
Dickinson added that while "some" supply chain costs were now beginning to fall, it was being offset by the cost of energy.
In equity markets, online supermarket Ocado (LON:OCDO) was hit by a downgrade to ‘underweight’ at JPMorgan (NYSE:JPM), while British American Tobacco (LON:BATS) slumped after a downgrade to ‘neutral’ at Goldman Sachs (NYSE:GS).
Packaging group Smurfit Kappa was also in the red after a trading statement.
Aston Martin Lagonda tumbled after the luxury car maker downgraded its delivery expectations as it pointed to supply chain issues, and posted a widening of its losses.
In an update for the nine months to 30 September, the company said it now expects total wholesales to be more in line with current consensus expectations at between 6,200 and 6,600, down from previous guidance of more than 6,600.
Hungary-based budget airline Wizz Air (LON:WIZZ) flew lower despite produced a better-than-expected second quarter, which helped interim profits to soar by a third.
Online fashion retailer ASOS (LON:ASOS) was sharply lower after Liberum downgraded rival Boohoo to ‘sell’.
On the upside, Next rallied after the retailer maintained its full-year guidance and posted a 0.4% rise in third-quarter full-price sales, slightly ahead of the company’s expectations.
GSK gained as the pharma giant lifted full-year guidance after beating third-quarter expectations with an 18% rise in revenues driven by its Shingrix shingles vaccine.
Hiscox (LON:HSX) was also up after it said gross premiums written rose 6.3% in the nine months to 30 September.
Market Movers
FTSE 100 (UKX) 7,161.38 -0.34%
FTSE 250 (MCX) 18,137.28 -0.32%
techMARK (TASX) 4,282.42 0.10%
FTSE 100 - Risers
Fresnillo (LON:FRES) 748.40p 2.21%
Airtel Africa (AAF) 117.80p 1.55%
Next (NXT) 5,038.00p 1.51%
Centrica (LON:CNA) 79.00p 1.41%
AstraZeneca (NASDAQ:AZN) 10,484.00p 1.33%
GSK (GSK) 1,464.00p 1.24%
B&M European Value Retail S.A. (DI) (BME) 342.20p 1.24%
F&C Investment Trust (FCIT) 904.00p 1.23%
Flutter Entertainment (CDI) (FLTR) 11,745.00p 1.12%
Ashtead Group (LON:AHT) 4,705.00p 1.12%
FTSE 100 - Fallers
Ocado Group (OCDO) 618.60p -5.50%
British American Tobacco (BATS) 3,317.00p -4.27%
Smurfit Kappa Group (CDI) (SKG) 2,803.00p -3.31%
Admiral Group (LON:ADML) (ADM) 1,977.00p -2.61%
SEGRO (SGRO) 777.00p -2.17%
Informa (INF) 553.60p -2.16%
Croda International (CRDA) 6,564.00p -1.97%
CRH (CDI) (LON:CRH) 3,075.00p -1.95%
Mondi (LON:MNDI) 1,450.50p -1.93%
Smith & Nephew (SN.) 1,004.50p -1.86%
FTSE 250 - Risers
Hiscox Limited (DI) (HSX) 952.60p 6.03%
Fidelity China Special Situations (LON:FCSS) 190.80p 2.47%
Ferrexpo (FXPO) 99.95p 2.41%
WH Smith (LON:SMWH) 1,234.00p 2.32%
PureTech Health (PRTC) 248.50p 2.26%
Watches of Switzerland Group (WOSG) 830.00p 1.97%
Rotork (LON:ROR) 265.20p 1.84%
Schroder Asia Pacific Fund (SDP) 466.00p 1.75%
Baltic Classifieds Group (BCG) 140.00p 1.74%
Lancashire Holdings Limited (LRE) 521.50p 1.66%
FTSE 250 - Fallers
Aston Martin Lagonda Global Holdings (AML) 90.04p -14.82%
ASOS (ASC) 582.00p -5.67%
Essentra (ESNT) 211.00p -4.95%
easyJet (LON:EZJ) 336.90p -4.83%
Wizz Air Holdings (WIZZ) 1,653.00p -4.73%
Pets at Home Group (PETS) 280.20p -4.56%
TI Fluid Systems (TIFS) 135.40p -3.42%
LondonMetric Property (LMP) 184.70p -3.20%
Morgan Sindall Group (MGNS) 1,532.00p -2.92%
IWG (IWG) 128.30p -2.73%
