Fed to start selling bonds, keeps interest rates steady


"The fact that the Fed is still doing this is a good sign that they have confidence that the economy is strong enough to be able to operate without them interjecting themselves", Spendlove said. "Out of New Zealand events today it would appear the Colmar Brunton poll has the most market focus", said Westpac Bank strategist Imre Speizer.

The announcement marks a milestone in the long recovery from 2008.

US Federal Reserve chair Janet Yellen has confirmed that the central bank will begin winding down its purchases of US Treasury and mortgage-backed securities in October. The Federal Open Market Committee is also expected to reveal the dot plot which will show the Fed's expectations regarding the interest rates in the coming months or period.

With the unexpected decrease, existing home sales fell to their lowest annual rate since hitting 5.34 million last August.

According to the CME Group's FedWatch tool, investors now see a 70.5 percent chance of a rate increase by the end of December. Raising rates too quickly could risk hobbling the recovery. As Caron put it, "Maybe the Fed is saying, financial conditions are easy, let's go ahead and hike rates".

"Storm-related disruptions and rebuilding will affect economic activity in the near-term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term", the Fed statement said.

No Fed officials dissented on the decision.

Fed observers widely expected the bank to hold off on another hike with inflation still lagging behind the Fed's 2 percent ideal level, which the bank argues strikes the right balance of steady price and wage growth with stable employment.

But inflation is still running below that target, even though the job market has picked up and other explanations have fallen away. And Yellen's press conference can be viewed here. North Korea who has been conducting ballistic missile tests in the past month recently fired a missile over Japan's Northern waters that sent not just the Asian market but also Global stocks trading lower during the past couple of weeks.

"They have never done this before, so we don't know how the markets are going to react", he said.

Bond prices fell, sending yields higher.

The central bank did, however, offer a rosier picture of the overall economy, upping its economic growth forecast to 2.4% from 2.2%.

Subdued inflation has largely underpinned skepticism of another Fed rate increase this year.