The yield on the U.S. 10-year Treasury note inched lower to stand at 4.97% after hitting the 5% mark earlier in the session. It rose above that threshold on Tuesday for the first time in three years, to hit its highest level since 2007.
The Federal Reserve will announce its policy decision at 1800 GMT (2 p.m. ET), followed by a press conference by Chair Kevin Warsh.
"It's a question of credibility for him to hike right now. If he doesn't hike this evening, it could be a problem for the Fed's credibility, its independence and for the stock market," said Michaël Nizard, head of multi-asset and overlay at Edmond de Rothschild Asset Management in Paris.
"It's also a question of guidance and a reaction function from the Fed. Today, it's very difficult to describe exactly what is a reaction function of the Fed."
U.S. President Donald Trump has repeatedly stated a preference for lower interest rates, saying last month the U.S. would stop trading with countries with which it runs a trade deficit if the Fed did not cut rates.
Traders have largely brushed aside those comments and see a rate hike as almost certain. Markets are pricing in a 92.7% probability of a 25-basis-point increase when the Fed announces its decision, according to CME Group's FedWatch tool, up from 61.2% a week ago.
The dollar index =USD, which measures the U.S. currency against a basket of six others, held firm at 99.64, nearing a two-week high.
The Japanese yen JPY= held steady at 155 per dollar after weakening over the previous two sessions ahead of the Bank of Japan's policy decision on Friday, when markets expect rates to rise to their highest level in 31 years.
British stocks .FTSE rose and the pound GBP= inched 0.1% lower after a domestic inflation reading did little to alter expectations ahead of the Bank of England's policy decision on Thursday, with markets largely expecting rates to remain unchanged. A rate increase is still expected by year-end.
"Sterling could strengthen in the coming weeks if the BoE signals hikes to come amid higher inflation and energy prices. The Japanese yen, meanwhile, could weaken if the BoJ's message falls short of hawkish market expectations," UBS Global Wealth Management analysts said in a note.
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