Fed keeps U.S. rates steady, to unwind portfolio in October

Dado Ruvic  Illustration  File

Yellen said the recent data breach points to the importance for strong cybersecurity controls - and that the Fed and other regulators are focused on ensuring banks have them in place, she noted.

The Dow Jones industrial average slipped 7 points, less than 0.1 percent, to 22,363.

With the increase on the day, the ten-year yield extended the upward trend seen in recent sessions, reaching its highest closing level in over a month.

Any comments on inflation could provide a signal about the likelihood third increase in the Fed's benchmark interest rate this year.

Fed Chair Janet Yellen said in a press conference after the meeting that a fall in inflation this year remained a mystery and said the US central bank was ready to change the rate outlook if needed.

"A rate hike in December seems unlikely given we don't know what the future membership of the Federal Reserve will be in a few months, the debt ceiling debate will be conducted in that month, and we don't know the impact of Hurricane Harvey and Irma", he added. Surveys of economists show they do not expect the Fed to raise interest rates at this time.

As well as plans for balance sheet unwinding, the Fed's Summary of Economic Projections and dot-plot are expected garner much of the attention, as investors are keen to assess whether the slowing pace of inflation has altered the central bank's longer-term view on interest rates.

The long-awaited reduction in the Fed's $4.5 trillion balance sheet comes amid great uncertainty at the central bank. The Fed is likely to undershoot its target of 2 percent annual inflation for the sixth consecutive year.

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Kraft Heinz fell 1.8 percent and NRG Energy lost 1.5 percent.

Global equity markets are mixed - Dow -0.02%, S&P 500 -0.02%, FTSE -0.05%, DAX +0.06%, CAC Closed, Nikkei +0.05%, Shanghai +0.27%. After leaving the rate at a record low for seven years after the 2008 crisis, the Fed has modestly raised it four times since December 2015 to a still-low range of 1 percent to 1.25 percent. "ORCRP000236-topic.html" class="local_link" >Adobe Systems fell 4.5 percent.

On the M&A front, Thyssenkrupp (TKAG.DE) rose more than 2 percent after it and India's Tata Steel TISC.N agreed to merge their European steel operations to create the continent's No.2 steelmaker.

The S&P 500 bank index gained more than 0.7 percent to its highest since early March, led by gains of more than 1 percent in a clutch of large regional lenders, including Suntrust Banks Inc, Zions Bancorp, PNC Financial Services, M&T Bank Corp and Regions Financial Corp.

Fed Chair Janet Yellen said the move was merited by healthy signs of economic recovery, with the central bank expecting the USA economy to continue growing at a moderate pace, over the next few years.

The loonie was at C$1.2254 per dollar CAD=D4 after losing 0.9 percent overnight, when it retreated to a 12-day low of C$1.2338.

Bond prices rose. The yield on the 10-year Treasury note fell to 2.24 percent. Brent crude, used to price worldwide oils, gained $1.15, or 2.1 percent, to $56.29 a barrel in London. In Asia, Japan's benchmark Nikkei 225 added almost 2.0 percent coming off a national holiday on Monday.

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