How major United States stock market indexes fared Wednesday

Dado Ruvic  Illustration  File

The Fed policymakers' updated economic forecasts show an expectation for three more rate increases in 2018. While US unemployment remains low, weak inflation readings still worry it.

The dollar fell 0.3 percent against the euro ahead of the two-day talks, with markets awaiting guidance on whether the Fed will signal a further hike in interest rates at its December meeting.

USA central bank leaders are expected to hold the key interest rate steady this week, but they may begin trimming a huge bond-buying program that was meant to boost economic growth.

Analysts said market will also be looking for clues of whether the Fed will raise rates in December.

Market participants are focusing their attention on whether the Fed will provide some sort of hints about an additional interest rate increase, the sources said.

Fed officials say they also foresee a slightly slower path for rate hikes in 2019. And though those revelations were not exactly unexpected, the everyday American is wondering: how are future rate hikes going to hit me in the wallet, and how can I protect myself?

The Fed has given clear signals it will start to wind down its $4.5 trillion balance sheet, in what would be a symbolic moment for the central bank after nearly a decade of unconventional monetary policy.

The balance sheet primarily consists of government and mortgage-backed bonds.

The economy expanded at a 2.1 percent annual rate in the first half - in line with the pace during this expansion - and US government 10-year notes yield about 2.24 percent, down from 2.45 percent at the start of the year. Its inflation target is 2 percent.

On Wall Street, stocks closed higher on Tuesday, though buying interest was somewhat subdued as traders seemed reluctant to make significant moves ahead of the Federal Reserve's monetary policy announcement on Wednesday.

Susan Ochs, senior fellow at the New America Foundation, noted that Chair Janet Yellen said five times during her Wednesday news conference that she didn't really understand what was going on with inflation.

The S&P's record came less than four months after it closed above 2,400 and brought 2017's gain to almost 12 percent. The Russell 2000 index of smaller-company stocks declined 0.1 percent, to 1,440.40.

The Dow rose 39.45 points or 0.2 percent to 22,370.80, the Nasdaq edged up 6.68 points or 0.1 percent to 6,461.32 and the S&P 500 inched up 2.78 points or 0.1 percent to 2,506.65.

Banks rose. Rising bond yields mean banks can charge higher interest rates on loans.

While the decision to shrink the Fed's balance sheet is much expected, when and how the Fed will manipulate its target for short-term interest rates is less clear.

United States stocks initially fell after the announcement, but pared losses by the end of the day, with both the Dow and the wider S&P 500 closing at new highs.

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