* Oil price stabilises as Saudi Arabia restores supply
* Investors expect Fed to cut rates by 25 basis points
* Treasury yields slip; dollar rises vs yen
* Wall St edges lower as FedEx profit warning hurts (Updates throughout with open of U.S. markets, changes dateline; previous LONDON)
By Saqib Iqbal Ahmed
NEW YORK, Sept 18 (Reuters) - Stocks around the world edged lower on Wednesday and the U.S. dollar crept up as investors waited for the U.S. Federal Reserve's decision on interest rates later in the day.
Oil prices cooled as Saudi Arabia's pledge to quickly restore production eased worries over supply.
The MSCI world equity index, which tracks shares in 47 countries, fell 0.16%.
Deep disagreements within the Federal Reserve over the economic outlook and how the U.S. central bank should respond to it is not expected to stop policymakers from cutting interest rates as a two-day meeting concludes on Wednesday.
While a 25-basis point rate cut by the Fed is widely expected, investors are looking to its statement after the meeting and economic projections for clues regarding future monetary policy moves.
Investors expect Chairman Jerome Powell to explain the Fed's position at a news briefing after the rate decision.
"The interesting aspect for me will be how Chair Powell characterizes recent strength in the data without sounding hawkish at the same time, because they do want to keep the door open for more cuts," said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York.
On Wall Street, stocks edged lower, hurt by economic bellwether FedEx Corp's warning on full-year profit.
The Dow Jones Industrial Average fell 67.61 points, or 0.25%, to 27,043.19, the S&P 500 lost 8.22 points, or 0.27%, to 2,997.48 and the Nasdaq Composite dropped 25.87 points, or 0.32%, to 8,160.15.
European shares steadied after early declines, as technology shares helped offset losses in luxury goods. The pan-European STOXX 600 index was 0.07% higher.
Oil prices retreated, extending the previous day's declines after Saudi Arabia said it would quickly restore full production following weekend attacks on its facilities.
Tension in the Middle East remained elevated, however, after Saudi Arabia said it would provide evidence on Wednesday linking Iran to the attacks. The United States had already said it believed the attacks against the world's top oil exporter originated in southwestern Iran.
U.S. crude fell 1.15% to $58.66 per barrel and Brent was last at $64.14, down 0.64% on the day.
In FX markets, the dollar rose to trade near a seven-week high against the yen.
Meanwhile, U.S. Treasury yields fell, with Benchmark 10-year notes were last up 16/32 in price to yield 1.7578%, down from 1.814% on Tuesday.
Possibly further complicating the Fed's discussions, short-term U.S. interest rates shot up this week, with overnight repo rates rising to 7%, due largely to seasonal factors such as huge payments for taxes and bond supply.
That prompted the New York Fed to conduct its first repo operation in more than a decade to inject funds to stressed money markets.
The New York Federal Reserve said late Tuesday it would conduct a repurchase agreement operation early on Wednesday "in order to help maintain the federal funds rate within the target range of" 2.00% to 2.25%.
Gold consolidated around $1,500 on Wednesday, keeping to a $3 range ahead of the Fed decision.
Reporting by Saqib Iqbal Ahmed; Additional reporting Karen Brettell; Editing by Bernadette Baum