Treasury yields held near highs hit Tuesday, with the 10-year at 2.29 percent and the 2-year at a four-year high of 0.82 percent.
"The bond market is hedging itself against an eventual increase (in rates)," said Ben Pace, chief investment officer at HPM Partners.
The U.S. dollar reversed to trade about a third of a percent lower against major world currencies, with the euro just below $1.13 and the yen around 120.6 yen against the greenback.
Wall Street is divided over whether the central bank will decide to raise rates. Forty-nine percent of respondents to CNBC's Fed Survey forecast a rate hike will come at the current meeting.
"I think (Thursday) afternoon the only thing I can guarantee is volatility for two hours," said James Meyer, chief investment officer at Tower Bridge Advisors.
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Stocks rallied more than 1 percent Tuesday, more than recouping Monday's mild losses. The Dow Jones industrial average joined the other major averages to end within 10 percent of its 52-week high, out of correction territory.
The Russell 2000 closed out of correction mode Wednesday.
"I think (Tuesday's) rally was sending a message to the Fed to go and raise rates, preparing the way for a solid fourth quarter for equities," Cardillo said.
Most strategists said the rally meant the Fed would hold off on tightening Thursday.
"It seems like the investors are optimistic that the Fed is going to stand pat and keep rates low," said Jack Ablin, chief investment officer at BMO Private Bank. "The Fed is stuck. They missed an opportunity."
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Analysts mostly looked past the last key data out ahead of the Fed meeting. August CPI, showed a decline of 0.1 percent, its first drop in seven months. The ex-food and energy figure rose 0.1 percent.
"The Fed can well afford to wait given inflation remains contained," said John Lonski, chief economist at Moody's.
In continued signs of strength in the housing sector, the September home builder sentiment rose one point to 62, the highest since 2005.
In early morning trade, U.S. stock futures were mostly flat. The Dow futures rose almost 50 points before dipping in and out of negative territory.
European shares closed higher, with the STOXX Europe up about 1.5 percent.
In Asia, China's benchmark Shanghai Composite index staged a late-day rally to close almost 5 percent higher — adding to upbeat sentiment in global stock markets.