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The U.S. Federal Reserve kept interest rates unchanged on Wednesday
and in a direct reference to its next policy meeting put a December rate hike firmly in play.

Investors had expected the Fed to remain pat on rates, but the overt reference to December came as a surprise.

The central bank also downplayed recent global financial market turmoil and said the U.S. labor market was still healing despite a slower pace of job growth.

"In determining whether it will be appropriate to raise the target range at its next meeting, the committee will assess progress - both realized and expected - toward its objectives of maximum employment and 2 percent inflation," the Fed said in a statement after its latest two-day policy meeting.

Investors quickly shifted their expectations of a December hike, with rates futures contracts upping the chance of a move this year to 43 percent from 34 percent prior to the statement.

"It's a subtle attempt to gently nudge the market in that direction, but not doing it so strongly that it would start to tighten broader financial conditions," said Aneta Markowska, chief U.S. economist at Societe Generale in New York.

"By specifically referring to that meeting they are basically testing the waters a bit, without unnerving the market," Markowska said.

The U.S. dollar rose sharply and yields for U.S. government debt soared in anticipation of tighter policy after the Fed statement. U.S. stock prices pared earlier gains before regaining momentum later in the session.

http://www.reuters.com/article/2015/10/28/us-usa-fed-idUSKCN0SM0BJ20151028