It would start with reductions of $10 billion a month - $6 billion in Treasurys and $4 billion in mortgage bonds - and raise the amount quarterly until it reached $50 billion a year later. How will it affect market interest rates, and the US dollar? The bank also lowered its long-run target to 2.8%, the first time it's fallen below 3%.
The Fed expanded its bond holdings - the major assets on its balance sheet - in the years after the financial crisis erupted in 2008.
It believes its strategy to do so gradually, according to a fixed schedule and slowly increasing the amounts, and signalled very clearly and well in advance to the financial markets, will allow for a smooth process with minimal market volatility.
If balance sheet expansion led to asset price inflation [bearish for gold], balance sheet taper could lead to asset price deflation [positive for gold]. Almost nine years later Fed officials believe the economy is strong enough to stand more on its own.
Beyond her own views on the economy, inflation and the Fed's balance sheet, Yellen might decide to drop a hint in her news conference about an even more tantalizing topic: Her own future. Yellen's four-year term as chair will end on February 3. In August, the US jobless rate was 4.4 percent, just above the 16-year low it touched in May and July.
Several times Yellen referred to doggedly low inflation as a "mystery", but the Fed stuck to its tried-and-true forecast that it will eventually rise to 2%.
CMC Markets analyst Michael Hewson said: "There's been a great deal of anticipation about this week's Federal Reserve rate meeting particularly since the FOMC looks set to pull the trigger on the beginning of the paring down of its $4.5trn balance sheet".
Amid an otherwise modest equity market response to the Fed's latest policy announcement, the move up in bank stocks stood out and tracked closely a climb in yields on U.S. Treasury securities.
Its size reflects bond purchases the Fed made after the crisis struck to try to ease long-term borrowing rates, encourage spending and energize an anemic economy.
And the nominal excuse for the Fed to hold the line on further rates hikes for the time being - the series of hurricanes that have battered the southern United States and seriously disrupted economic activity - may have bought the Fed some useful time.
Yellen declined to say at a news conference whether she would like to serve a second term.
One of the more interesting moves was in USD/JPY, where the greenback has gone on a significant tear after ripping out of the range it was capped in at 111.
Yellen can expect to be asked, again, about whether she's discussed her future with President Donald Trump, after it emerged that she had breakfast with his daughter Ivanka in July.
South African bonds were marginally weaker at midday on Tuesday as the market remained focused on the Reserve Bank's interest rate decision on Thursday, and the release of consumer inflation data on Wednesday.
The other policy decision on Yellen's agenda involves the Fed's so-called balance sheet.
But the Fed has yet to achieve its other objective of stabilizing prices at a 2 percent annual rate. One vacancy about to open is the seat of Vice Chairman Stanley Fischer, who is stepping down next month.