Chart 1 shows how QE has bloated central bank assets as a proportion of gross domestic product (GDP) for the Eurozone, the USA and Japan.
The 30-year Treasury yield was trading at 2.780-a fall of ~0.99%. The big question that forex market participants will be waiting to be answered is with respect to the Fed board's forecasts for future rate increases (the "dot plot") and the assessment of economic conditions - together with fresh forecasts about growth, inflation and unemployment.
U.S. Treasury prices were little changed Thursday, leaving the 2-year Treasury yield near an nearly nine-year high after the Federal Reserve on Wednesday indicated that it still plans to deliver another rate increase in 2017. Traders will be listening for any indications that the central bank could move sooner on a rate increase and for details on the timing for when the Fed might start shrinking its multitrillion-dollar stockpile of bonds. That suggests they expect growth to remain sluggish and inflation low, and therefore don't need to raise rates as high to keep prices in check. Markets are also waiting for any hints of a rate hike in December.
Under the plan the Fed announced, it will start to allow a slight $10 billion in holdings to roll off the balance sheet each month - $6 billion in Treasurys and $4 billion in mortgage bonds. The Fed's balance sheet reduction could worsen that. This will rise by $10 billion each quarter until it hits $50 billion, according to Politico.
Fed officials chose to keep their short-term benchmark rate between 1 percent and 1.25 percent.
The Fed, in its statement released yesterday, noted that market-based measures of inflation have stayed low over the year.
Still, the Fed said in a statement that prices for gasoline and other items might temporarily spike because of the damage caused by Hurricanes Harvey, Irma and Maria.
Tokyo was following Wall Street higher, as United States stocks logged fresh records in advance of this week's meeting of the Federal Reserve, which is expected to announce a drawdown of its massive bond holdings.
"It doesn't get any more brazenly hawkish from Dr Yellen, who along with the majority of her colleagues are clearly in the December rate hike camp and the markets are reacting to this news", said Stephen Innes, head of Asia-Pacific trading at OANDA.
I believe that the Federal Reserve may have trouble raising interest rates in the environment post hurricane, so I think that the pair may struggle a bit. Hong Kong's Hang Seng index added 0.4 percent to 28,127.80.
The large-cap S&P 500 Index (NYSEARCA:SPY) rose 0.1% to close at 2,508.24, its fourth straight record close.
In fixed income, the yield on the benchmark government bond due in 2026 was down 1.5 basis points to 8.42 percent.
"Trump's comments were actually very strong and the won would have moved more if it were not for the overall cautious mood before the Fed's decision", said Kim Doo-un, a foreign exchange analyst at Hana Financial Investment Seoul.
The 2-year Treasury note yield TMUBMUSD02Y, -0.55% the most sensitive to Fed policy shifts, was little changed at 1.443%, after hitting its highest level since November 3, 2008, according to WSJ Market Data Group.