By Greg Peel

The Dow closed up 34 points or 0.2% while the S&P gained 0.4% to 1704 and the Nasdaq added 0.7%.

Despite a weak start yesterday morning, Bridge Street hung in there yesterday and on low volume closed about square. The countdown to arguably the most important FOMC meeting since 2009 is on. At 4.15am tomorrow Sydney time, the world will learn whether the greatest monetary experiment in history will begin a slow unwind. The release of the Fed statement will be followed by a press conference in which Ben Bernanke may provide the more specific details.

There remain those arguing the Fed may not announce tapering just yet, based on recent, not so flash US economic data. But the great majority of market participants feels a tapering announcement is a given, and that tapering will begin forthwith. It then becomes a matter of degree, with a US$10bn reduction the hot tip.

There is also a question of exactly what the Fed will reduce. The central bank has been purchasing both US Treasuries and mortgage-backed securities on and off in a mix since 2009. The Fed's own research suggests the purchase of government bonds is not having a lot of impact on the economy any more, other than to bolster the balance sheets of the big banks. The research does, however, show that the housing market is being boosted by Fed support in mortgage securities. It would thus make sense to start tapering bond purchases specifically and not mortgage purchases, lest the housing recovery be sharply impacted.

The latest measure of NAHB housing market sentiment, released last night, showed the index steady at 58. A reading over 50 implies optimism, and this month's reading remains an eight-year high. The peak for the index occurred in 2005, at 68.

The other US economic data point of note last night was the CPI. Headline inflation rose a mere 0.1% in August, constrained by a post-summer easing in energy costs. Core inflation also rose 0.1% to provide 1.8% growth over twelve months and continues to sit below the Fed's 2% target rate. Low inflation provides no impediment to QE, and hence no impetus for tapering to begin expediently. It does, nevertheless, allow the Fed to start unwinding its massive four-year plus stimulus program slowly and incrementally, reducing the risk of a sharp negative impact on the economic recovery.

The other news of the day was an announced 22% dividend increase and US$40bn share buyback program from Microsoft (Dow), which helped buoy what was otherwise a wait-and-see mood.

There's no further need to discuss it. By this time tomorrow we'll know.

The US dollar index slipped 0.2% to 81.16 and the Aussie is 0.4% higher at US$0.9355. The latest kick-up in the Aussie was provided yesterday by the release of the minutes of the September RBA meeting, which strongly indicated, as assumed, that the central bank has pulled back to a more neutral, and less dovish, bias. From the minutes, with emphasis added by me:

"The decision to reduce the cash rate at the August meeting, where the Board had judged that the outlook for inflation provided the scope to ease monetary policy further, brought the total reduction in the cash rate since late 2011 to 225 basis points. Lending rates had declined to historically low levels as a result, which, together with the lower ? though still high ? exchange rate, were continuing to provide a substantial degree of policy stimulus to the economy. This was most evident in the housing market, with the lags in the effect of policy meaning that earlier actions were still likely to take some time to have their full effect on demand more generally. These conditions would, over time, help the economy negotiate the prospective downshift in resources investment via a switch to other sources of demand. Some further decline in the exchange rate would be helpful in achieving such an outcome.

"Given the substantial degree of policy stimulus in place, the Board judged that it was appropriate to retain the current setting of interest rates. Members agreed that the Bank should again neither close off the possibility of reducing rates further nor signal an imminent intention to reduce them. The Board would continue to examine the data over the months ahead to assess whether monetary policy was appropriately configured."

Gold was steady last night at US$1310.50/oz. Base metals were mostly weaker on negligible moves. The oils again tracked lower as the Syria premium works its way out of the market, with Brent falling US$1.71 to US$107.92/bbl and West Texas falling US$1.08 to US$105.51/bbl. Spot iron ore dropped US$3 to US$131.10/tonne.

The SPI Overnight closed up 6 points.

For what it's worth, Beijing is expected to report monthly Chinese property prices today and in the US tonight, the leading economic index, Philadelphia Fed manufacturing index and monthly housing starts will be released. All that matters, nonetheless, is what the Fed has to say. Presumably we can all strap in for a very quiet session on Bridge Street today.

Rudi will appear on Sky Business tonight at 5.30pm.