It was the FOMC's 12th consecutive increase, bringing the benchmark federal funds rate to 4.0 percent. The move had been widely expected and analysts were more interested in parsing the wording of the Fed's statement.
"The key code to look at is 'accommodation,' which suggests interest rates are lower than neutral, and 'measured,' which suggests a 25-basis-point clip," said Richard Dekaser, chief economist at National City Corp "It suggests another tightening in December."
Apart from the deletion of more detailed references to Hurricane Katrina, the central bank offered much of last month's upbeat assessment of economic conditions - a mantra the bond market has grown tired of hearing.
On the inflation front, policy-makers saw the continued risk of an energy-related spike in costs, but noted that core prices had remained well contained.
In choppy, volatile trade, benchmark 10-year notes slipped 4/32 for a yield of 4.58 percent from 4.56 percent on Monday. Two-year notes edged down 2/32 and were yielding 4.42 percent, up from 4.39 percent.
"Inflation is making the Fed a little nervous even though they reiterate that core inflation and long-term inflation expectations are contained," said Drew Matus, senior financial economist at Lehman Brothers.
"This is a recipe for the Fed to raise interest rates at a measured pace," said Matus. "We expect the benchmark federal funds rate to reach 4.75 percent with rate hikes in December, January and March, with the risk that the Fed will push it even higher to 5.0 percent."
Investors' propensity to sell short-dated debt disproportionately helped flatten the yield curve again, narrowing spreads between 10- and two-year notes 1 basis point to 16.
Five-year notes were off 3/32 and yielding 4.47 percent, while the 30-year bond was down 5/32 in price for a yield of 4.77 percent.
Bonds had started the session lower after a national manufacturing survey showed US factories sustained a robust rate of expansion in October.
The Institute for Supply Management's index of factory activity eased to 59.1 in October from 59.4 in September, but surpassed forecasts for a bigger drop to 57.0.
Rising costs were increasingly a source of concern for manufacturers, with the survey's prices paid measure jumping to 84.0 from September's 78.0.