"We had suspected that the recent softness of core inflation could persuade officials to hold off on the next rate hike until next year", said Andrew Hunter, U.S. economist at Capital Economics. If the situation deteriorates however the market would likely move lower and lower. And though the Fed Chair's rhetoric is inevitably contagious within our economy, there are ways of building up some immunity for your assets and loans.
Expectations for the Fed to raise interest rates in December have risen since.
"You just had that little momentum spurt after it went through 2,500 but it is kind of running out of steam and is going to bide its time until Wednesday, when they listen to (Fed chief) Janet" (Yellen), said Ken Polcari, director of the NYSE floor division at O'Neil Securities in NY.
Yellen has said the unloading process will be orderly and gradual. However, the Fed has turned more upbeat over the economic environment otherwise.
The Fed projects a 2.4% growth in the economy this year, which is a marked improvement over last year, and they expect unemployment to continue dropping down to 4.1% next year. It has also trimmed its inflation forecast.
The central bank also expects inflation will remain stubbornly low.
Anticipation of Wednesday's Fed announcement sent financial stocks higher on Monday, helping the S&P 500 end higher despite losses in five of the eleven major S&P sectors. The long-run outlook for GDP remained at 1.8 percent. They continued to forecast one more interest-rate hike later this year, saying storm damage will have only a temporary impact on the economy. MSCI's gauge of stocks across the globe gained 0.14 percent and hit another record high.
"Keeping rate hikes where they were was expected. Investors are likely to look past the Fed's interest rate decision and even the plan to shrink the Fed's balance sheet, focusing primarily upon the Fed's forward guidance", said Jingyi Pan, a market strategist at IG in Singapore.
As a recap of the plan announced in June, the Fed has set the cap at US$10B/ month initially.
At the two-day Federal Open Market Committee meeting, the USA central bank is widely expected to announce plans to trim its balance sheet but hold off raising interest rates for now.
The Nikkei has gained almost 30 percent since Abe attained political power in late 2012.
Bond prices rose. The yield on the 10-year Treasury note fell to 2.23 percent.
"Hurricanes Harvey, Irma and Maria have devastated many communities, inflicting severe hardship", said the Fed in its post-meeting statement.
The dollar weakened against a basket of currencies on Tuesday in advance of a Federal Reserve meeting where policymakers are expected to decide on shrinking the central bank's $4.2 trillion in bond holdings. In sum, that means the Fed now believes it won't reach its 2 percent target until 2019. Asian markets were weak through Wednesday. The Dow Jones industrial average 0.3 percent to 22,268.34, its fourth record close in a row.
The Shanghai Composite Index gained 0.3 percent to 3,363.91 and Hong Kong's Hang Seng rose 0.9 percent to 28,065.35.
Mortgage rates are still low, and the Fed seems committed to small, incremental increases with plenty of warning to investors and borrowers.
Now the question for the Fed, then, is how it handles interest rates when half of its mandate is a black box and it is engaging in balance sheet policy experiments on the fly.
The greenback lost 0.1 percent against the yen on Tuesday, but hits an eight-week high after signs of strong inflation led to positive United States treasury yields.