Investors, however, awaited details on how the central bank will unwind its $4.5 trillion balance sheet.
For the Fed, however, it's not as simple as selling off all its assets at once.
Picture shows the Federal Reserve building in Washington.
Fed chair Janet Yellen has said she wants the balance sheet reduction to be as boring as "watching paint dry", and its slow pace seems created to calm markets. Beginning in October, it will gradually let the size of the balance sheet shrink, but it should happen so gradually that it won't have a material effect on fixed income yields.
The only thing that really changed in the key second paragraph of the Fed's statement is a reference to the hurricanes that ripped through Texas and Florida and their impact on energy prices and the broader economy. The reason for this, Slok explains, is that any economic slowdown due to the hurricanes will be made up in future quarters and the Fed aims to look through the temporary volatility.
The Fed's view also prompted rotation into financial shares, which benefit from higher interest rates, from tech shares, he added. And when I say inflation is misbehaving, I am not talking about a jump in prices that would, in the past, have warranted higher interest rates or the threat of them.
On its holdings of agency debt and mortgage-backed securities by $4bn initially, then increasing by $4bn in three-monthly steps until reaching $20bn a month. However, even if it is a surprise and the market reacts it will "move on pretty quickly".
In its policy statement, the Fed cited low unemployment, growth in business investment, and an economic expansion that has been moderate but durable this year as justifying it's decision.
"Catching the equity market off guard was the dot plot indicating that 12 of the 16 voting members project a December rate hike", said Quincy Krosby, Chief Market Strategist at Prudential Financial."There remains an ongoing tug of war between those who think the economy is still too weak to handle another rate hike versus those who say that financial conditions and a strengthening global economy warrant the move towards rate normalization".
The Fed announced Wednesday it would start winding down its $4.5-trillion balance sheet in October.
As it did in June, the Fed continues to lean toward one more rate hike in 2017 and three more in 2018; however, the average year-end targets for the fed funds rate are slightly lower. It stopped the big buying spree in 2014.
"The markets reacted to the Fed quite straightforwardly, with shorter yields rising more than long-dated bond yields".
Having such a big balance sheet already makes it hard for the Fed to use this tactic again if a recession were to hit soon. Global fixed income markets will next take their cues from growth and, especially, inflation readings, as well as from guidance from the ECB and the Bank of England about the potential for monetary policy adjustment in the Eurozone and the United Kingdom in the coming few months.
So far, Wall Street seems fine with the Fed's plan.
The euro slid 0.8 percent to $1.1894, its lowest in four sessions, while the greenback gained 0.5 percent to 112.17 yen after touching a two-month high at 112.51 yen, Reuters data showed.
BMO revised third-quarter growth for the United States down to 2.0 percent from 2.4 percent, but raised fourth-quarter growth to 2.9 percent from 2.5 percent.
Get today's live mortgage rates now. The central bank did not raise its target for short-term interest rates at this month's meeting, which adjourned on September 20th.