US stocks edged up in early afternoon trading on Tuesday, helped largely by gains in telecom stocks, but traded in a narrow range as investors stayed away from making major bets ahead of the Federal Reserve's policy meeting.
Asian shares hit a decade high on Monday and the dollar hovered around an eight-week peak against the yen, in the start to a week in which the Fed is likely to announce balance sheet tapering. The S&P 500 closed at a record for its second consecutive day on Monday while the Dow Jones Industrial Average enjoyed its fifth consecutive record close. Australia's S&P/ASX 200 fell 0.7 percent to 5,668.90. Benchmark 10-year notes fell 9/32 in price to yield 2.27 percent, after yields got as far as 2.29 percent, the highest since August 8. The Fed is expected to gradually reduce this program over the next few years.
At the same time, the Fed did not raise its benchmark interest rate from its current 1 percent to 1.25 percent target, but indicated that one more hike is likely this year.
"Certainly that will have a big influence as we look towards the readings on inflation going forward".
Federal Reserve policymakers said today they're keeping interest rates where they are for now.
Fed officials also expect both low unemployment and low inflation to persist over the next several years, a curious combination that economists are struggling to understand. The median dot plot continued to project one more rate hike this year, followed by three more increases in 2018.
With the North Korea issue put on the backburner for now and two hurricanes in the rearview mirror, investors turned their attention back to macro issues and particularly the Federal Reserve's policy meeting this week.
Back-to-back hurricanes that slammed into Texas and Florida - with Hurricane Jose still looming off the eastern U.S. seaboard and Hurricane Maria bearing down on Puerto Rico - also could influence Fed thinking about the timing of the next rate hike, though it is unclear in what direction.
The US Federal Reserve has taken the historic decision to start unwinding its huge $4.2 trillion (£3.1 trillion) portfolio of bonds built up through its stimulus efforts following the financial crisis.
The 10-year yield on Monday touched a almost three-year high at 2.119 per cent.
Investors focused on Fed's policy statement and projections due to be released at 2 p.m. ET (1800 GMT).
Markets will also be watching for clues on the timing of the Fed's next interest rate hike as these tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion. The policy rate also stayed unchanged at 1-1.25%.
Fed officials predicted that inflation would rebound modestly next year, approaching the Fed's target of a 2 percent annual pace. Depsite downward revision in the core CPI for this year, the staff upgraded the economic growth outlook and downgraded the unemployment rate forecast.