Euro zone government bond yields steadied on Wednesday ahead of the Federal Reserve's policy meeting, after U.S. data dampened speculation that the central bank might signal a slower pace of monetary tightening.

U.S. job openings unexpectedly rose in September, suggesting demand for labor remained strong.

Markets forecast another rate hike of 75 basis points (bps), which would bring the U.S. federal funds rate to 3.75%-4.00%, and they see the current round of increases ending in the first half of 2023 at 4.75-5.00%.

"We expect the 10-year Bund yield to be at 2.25-2.5% by the end of the year," said Rohan Khanna, research strategist at UBS.

"We see the euro area's inflation at around 10% in the next two or three months, which means that the ECB will find it hard to signal a slowdown in its monetary tightening path," he added.

Germany's 10-year government bond yield was up 1.5 basis points (bps) at 2.15%.

Following yesterday's U.S. data, "our economists now expect any slowdown in the pace of rate hikes to be met by guidance that the Fed might hike for longer and to a higher terminal rate," Citi analysts said.

They "see Powell explicitly stating that the risks of under-tightening are much greater than those of over-tightening as a strongly hawkish outcome," Citi analysts added.

According to UBS' Khanna "the U.S. central bank will keep its options open, including a further 75 bp hike in December".

The U.S. Federal Reserve's Federal Open Market Committee (FOMC) will issue a statement at 1800 GMT, and Chair Jerome Powell will hold a news conference half an hour later.

"Any signal of a pivot risks leading to easier financial conditions that makes their job of bringing down inflation even harder," Deutsche Bank analysts said.

"That was what happened after the July meeting, where investors interpreted matters in a dovish light, and the Fed had to reiterate their hawkish intent, culminating in Chair Powell's August speech at Jackson Hole," they added.

Investors also focused on economic data from the euro area even if they reckoned the impact remained relatively subdued.

The decline in euro zone manufacturing activity was sharper than initially estimated last month, indicating that the sector is in recession.

Italy's 10-year government bond yield was up 3 bps to 4.29% with the spread between Italian and German 10-year yields at 214 bps.

(Reporting by Stefano Rebaudo; Editing by Hugh Lawson, Kirsten Donovan)