Surprising no one, the Federal Reserve has held rates and announced that it will start unwinding its massive balance sheet in October.
In an unanimous decision reached by the Federal Open Market Committee (FOMC), in October the Fed will start slowly reducing the $4.5 trillion balance sheet by an initial $10 billion.
On July 15, the agency said it would start ‘gradually reducing’ its $4.5 trillion of bond holdings by initially holding back $6 billion per month of maturing Treasury proceeds, a cap which would rise in increments of $6 billion every three months until it is holding back $30 billion a month in a year's time.
For proceeds from its holdings of agency debt and mortgage-backed securities, the cap will be $4 billion per month initially and will increase in steps of $4 billion at three-month intervals over 12 months until it is holding back $20 billion per month.
The $10 billion announced on Wednesday is in line with the July guidance.
Meanwhile, the central bank left its benchmark interest rate unchanged, with one more hike likely to happen in December.
The Fed has kept rates at their current range of 1% to 1.25%, but indicated that one more increase was likely this year.
The bank's officials have though projected one fewer rate hike than they had previously estimated between now and 2019.
'The US Federal Reserve has firmly signaled that a December rate rise is still on the table. But it will be hard for investors to put too much faith in this forecast while there is still plenty of time for the Fed to change its mind,' said Luke Bartholomew, investment strategist at Aberdeen Standard Investments.
'Clearly the Fed still believes that lower unemployment will eventually translate into a pick-up in inflation. But if inflation continues to undershoot it is hard to see the Fed following through on a hike,' he added.