Markets have shown no signs of trepidation in advance of the start of the tapering process.
The yield on the benchmark 10-year U.S. Treasury note settled at 2.276%, its highest close since August 8, up from 2.239% Tuesday.
Markets had priced in a near-zero chance that the Fed would change interest rates. Policy rates: http://tmsnrt.rs/2jzc8LiThe Fed is also responding to years of criticism from Republican members of Congress who say it has overstepped its remit by buying mortgage-backed securities, which stimulates the housing sector but not others. The "dots" continue to suggest one more rate hike this year, but the long-run estimate of the Fed Funds rate was trimmed by 20 basis points.
The central bank "gave only passing mention to inflation outside of assuming it will return to the 2% level in the medium term", while continuing to leave near-term rate projections in place, said Ian Lyngen, head of US rates strategy at BMO Capital Markets.
That has now changed and when the programme gets up to speed the Fed will be reducing its balance sheet by $600 billion a year'.
They forecast US economic growth of 2.4% in 2017, a 0.2% increase from the previous projection of 2.2% in June. "The central banks hate visibility, and the size and composition of the balance sheet makes it very hard".
US crude prices were up 1.07 per cent to $50.01 a barrel. The Fed today lowered its estimate of the final resting spot of the Fed Funds rate to 2.8% from 3%. "Higher prices for gasoline and some other items in the aftermath of the hurricanes will likely boost inflation temporarily".
"The market could throw a little bit of a fit if they push (balance sheet reduction) back".
Some Fed officials have warned against raising interest rates until inflation - which reflects the prices of everything from meat and cheese to houses and cars - meets the goal of 2% that they consider healthy for the economy.
At 11:02 a.m. ET, the Dow Jones Industrial Average was down 1.88 points, or 0.01 percent, at 22,368.92, the S&P was down 1.73 points, or 0.07 percent, at 2,504.92 and the Nasdaq Composite was down 26.50 points, or 0.41 percent, at 6,434.82.
The market is pricing in a 60% possibility of one rate hike in the U.S. this year.
There is definitely some complacent money in the United States dollars markets, and the Fed would be just the kind of high-profile event which could see it removed.