US Treasuries rallied, pushing yields on 10-year note seven basis points lower to 2.13pc.
Wall Street was mixed, giving up earlier gains. In 3.31pm trading in New York, the Dow Jones Industrial Average eked out a 0.05 per cent gain. However, the Nasdaq Composite Index dropped 0.8 per cent. In 3.15pm trading, the Standard & Poor's 500 Index fell 0.4 per cent. The Dow touched a record high 21,379.32 earlier in the day.
"Everyone is concerned about the path of interest rate increases as well as the methodology for reducing the balance sheet, and this is creating a little bit of volatility intraday," Chad Morganlander, a money manager at Stifel, Nicolaus & Co in Florham Park, New Jersey, told Bloomberg.
"The volatility should creep higher in the course of the summer months as Fed moves further in adjusting the balance sheet."
The Fed kept to earlier predictions it might raise its target rate once more this year.
"The Fed announcing an update to their reinvestment principles leaves September open," said Gennady Goldberg, interest rate strategist at TD Securities, told Reuters. "The start of balance sheet runoff and the fact that they haven't slowed their projected path of rate hikes suggest they can do both balance sheet and rate hikes at the same time."
Meanwhile, Yellen dodged questions about whether she would stay on for another term if President Donald Trump asks her to stay. Her term ends in February.
"I fully intend to serve out my term as chair," Yellen said at a press conference Wednesday in Washington, adding, "I have not had conversations with the president about future plans," Bloomberg reported.
The Dow rose as gains in shares of Travelers Cos and those of Home Depot, recently up 1.5 per cent and 1.4 per cent respectively, outweighed slides in shares of Apple and those of Intel, recently down 1.8 per cent and 1.6 per cent respectively.
In Europe, the Stoxx 600 Index ended the day with a 0.3 per cent slide from the previous close. France's CAC40 Index fell 0.4 per cent, while the UK's FTSE 100 Index also declined 0.4 per cent.
Germany's DAX Index rose 0.3 per cent.