Despite signs the European economy is picking up, the European Central Bank has indicated it will keep purchasing assets until September next year, although there has been increasing chatter of a slowing in the rate of bond buying. "It's for political reasons", Willem Buiter, Citigroup's global chief economist, said at New York University's Stern School of Business this month.
The Fed will scale back its holdings by $10 billion in October and raise that amount gradually in the months to come.
The Fed did stick to its earlier projection of one more rate hike this year, which most analysts have been projecting in December. Banks benefit from higher bond yields because it means they can charge higher interest rates on loans.
The Fed has always held a portfolio of financial assets, mostly US treasuries, to help it manage short-term interest rates.
Some of this overbalancing towards lower rates has been correcting slightly of late.
Asian markets moved tentatively today ahead of a Federal Reserve policy decision, while geopolitical issues returned after Donald Trump threatened to "totally destroy" North Korea if it threatened the United States or its allies.
"We see the odds of a summer Fed rate increase rising if USA data this week show solid job gains, rising wages and an inflation pick-up", wrote Richard Turnill, BlackRock's global strategist.
The prospect of another Fed rate hike this year at a time when the USA economy is growing modestly and may slow somewhat from the impact of hurricanes Harvey and Irma, could be bad news for stocks the next few weeks, Chalupnik said. But they said the storms would not "materially alter" the country's economy overall.
The Fed statement also sent the dollar higher against other currencies.
The market is pricing in a 60 percent possibility of one rate hike in the USA this year. Acceleration of inflation will lead to a faster increase in the Fed rate from the second half of 2018 and to a significant reduction in balance.
But inflation is still running below that target, even though the job market has picked up and other explanations have fallen away.
That's why it's important to tune in to the press conference (or at least read about it after the fact).
But if the bank moves too slowly, it could end up still sitting on a bloated balance sheet when the economy hits its next downturn - leaving it without the some of tools it needs to stimulate growth.
"I think that they will still on average lean toward hiking in December", he told AFP, noting there are a "sufficient number" of officials who believe low inflation is due to temporary factors.
He said better than expected U.S. inflation figures had also fuelled the rate hike expectations.
Of course, consumer price inflation is now only 1.9% - a low level - suggesting consumers can handle a pickup. But after the Great Recession, the Fed massively expanded that portfolio - from USA treasuries into mortgage-backed securities and the like - to shore up the financial system, put a floor under the recession, and try to stimulate the economy. Investors also are looking for indications of when and how central bankers will start selling off bonds bought to shore up economic growth after the 2008 crisis. It has raised rates three times since last December, twice this year. Her first term ends in February. Attention will turn to Wednesday's Fed decision, with a focus on details on unwinding part of the central bank's $4.5trn balance sheet.