Fed Expected to Raise Interest Rates

Policy makers say they are "monitoring developments closely", meaning they are likely wait for confirmation that recent economic weakness is "transitory".

In a statement, the Kuwaiti central bank noted that it had hiked its key rate following US interest rate rises in the past.

To shrink the balance sheet, the Fed said it will gradually taper the amount of proceeds from maturing securities and allow some to run-off.

In a sign of confidence, the Fed upgraded its forecast for US economic growth and unemployment this year.

The central bank's decision comes after lots of signs that the US economy is in good shape.

Though investors have pegged the likelihood of a rate increase Wednesday at near 100 percent, there's much less certainty about the prospect or timing of any further hikes.

Fed policymakers also released their latest set of quarterly economic forecasts, which showed only temporary concern about inflation and continued confidence about economic growth in the coming years.

Andrew Levin, a career Fed economist who was a special adviser to Fed Chairman Ben Bernanke, told Business Insider he was anxious by a noticeable decline in inflation expectations, both as reflected in consumer surveys and bond-market rates.

Federal Reserve Chair Janet Yellen speaks to reporters in Washington, D.C., on Wednesday after the Fed announced it would increase interest rates by a quarter-point.

- DXY Index has held steady past few days, the fairly typical low volatility precursor to a key FOMC policy meeting. Volume on the NYSE was tracking slightly higher than Tuesday's level.

Data this morning showed that the United Kingdom unemployment rate held steady in the three months to April, but regular wages adjusted for inflation fell on the year for the second consecutive month, suggesting accelerating inflation is squeezing British shoppers' wallets. The Fed still foresees prices, as measured by a gauge tied to consumer spending, rising 2 percent in 2018 and 2019, achieving its target.

While traders continued to see a more than 93 percent chance for the Fed to raise rates at the end of the two-day meeting on Wednesday, they dialed back the odds of a third hike this year.

Inflation has been more problematic, having long stayed below the central bank's 2 percent target rate. Now it's making plans to reduce those holdings, which total more than $4 trillion. By tomorrow afternoon, we'll know for certain whether rates have gone up another 25 basis points to a 1-1.25% range. We are not there yet, but the next few weeks will be very interesting to see if long bonds rise because investors are fearing inflation and more rate hikes to curb it, or if long bonds break below the 2016 yield curve trough in a sign that investors are more anxious about the outlook for growth and fear that long bonds are portending a recession.

The Fed rate hike is likely to lead to Rupee depreciation, due to the cascading effect on all emerging markets. He is a Chartered Market Technician, a Chartered Financial Analyst charterholder, and is a US -registered Commodity Trading Advisor.