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Markets applauded the Federal Reserve's decision to delay any pullback in its monthly bond purchases, but economists warn the boost to stocks, bonds and gold may prove to be short-lived.

All three assets surged when the Fed surprised observers with its decision to stick with its monthly bond-purchasing program, rather than taper.

"The Fed clearly wants to provide more juice to risk-appetite," said David Rosenberg, chief economist and strategist at Gluskin Sheff + Associates Inc..

The S&P 500 rallied to a record high of 1,725.52, up 20.76 points or 1.2 per cent, erasing an earlier decline. The yield on the 10-year U.S. Treasury bond fell to one-month low of 2.69 per cent. Gold jumped to $1,366 (U.S.) an ounce, up nearly $57.

However, the Fed continued to warn that stimulus could be cut back later in the year, leaving investors uncertain over whether this is the start of a pronounced longer-term rally or a one-day blip.

According to Douglas Porter, chief economist at BMO Nesbitt Burns, the decision Wednesday will look like nothing more than a "tempest in a teapot" should the Fed merely delay tapering for another month.

"But if this is an extension of the same policy through to the end of the year and potentially into 2014, then it does signal something quite significant," he said. "It means the Fed is even more dovish than many of us believed."

Many economists had believed the Fed would choose its September policy meeting to announce the start of tapering because it could use a follow-up press conference to clarify its position.

The October meeting has no press conference, and the next scheduled policy meeting with a press conference doesn't occur until mid-December, when markets are geared up for the holiday break.

"Considering the impact it would have on the equity market a week before Christmas, it would be Scrooge-like to say the least," Mr. Rosenberg said.

That makes the end of January – likely Mr. Bernanke's last policy meeting as Fed chairman – the earliest date for a potential tapering announcement, he says.

In delaying now, the Fed is saying that it is unhappy with the severity of rising bond yields, which surged with the initial chatter of a shift in Fed policy, Mr. Rosenberg says. Rising interest rates could slow down the U.S. housing recovery.

"The Fed has effectively put a cap on how far bond yields are going to go in this environment, barring any explosive growth on the horizon," he said. That should stabilize bonds at this level, he believes.

The reverberations of Wednesday's decision could be seen well beyond the bond market, though. Homebuilding stocks bounced more than 5 per cent on the Fed announcement, while dividend stocks also rallied more than the broader market.

Exchange-traded funds that track emerging market stocks rose about 4 per cent. And anything tied to the U.S. dollar, which includes gold, was suddenly hot again.

However, not everyone is seeing good days ahead. In surprising the market and sending assets on a wild course, the Fed is opening itself to criticism that its communications strategy is muddled – which could make the road ahead anything but smooth.

"We wonder whether the longer-lasting reaction will be increased volatility in markets, as the Fed's communications become even more confused," said Paul Ashworth, chief U.S. economist at Capital Economics.