Tech firms led a surge in the Nasdaq and S&P 500 on Wall Street after the central bank unveiled its forecast quarter-point increase in borrowing costs but also noted progress in bringing prices under control.
And while chair Jerome Powell warned officials would need "substantially more evidence" to be confident that inflation is on a sustained downward path, analysts said he appeared unmoved by market expectations for a lower "terminal rate".
The decision to lift rates by the smallest amount in almost a year came after a series of data points suggested the world's top economy was slowing down, with inflation at its lowest since October 2021.
The broadly dovish turn from the Fed provided a fillip to investors, who had grown concerned that January's rally may have been overdone and that the rate hikes would continue for well into the year.
"The message from chair Powell and the Fed committee members was to be 'mission not-accomplished', that the disinflation process had only just begun and there is more to be done to get inflation back to the 2% target with on-going rates hikes," said Kerry Craig at JP Morgan Asset Management.
"However, what was delivered was a more dovish message that didn't really push back on the market expectation that the Fed won't reach a policy rate over five percent."
He added that Powell "seems to be less concerned about short-term moves in financial conditions and more so with the 450 basis points in policy tightening in the last 12 months and the lagged impact it would have on the economy".
"Even as Chair Powell reiterated the Fed's commitment to getting inflation back to the mandated percent target, it also referenced the ongoing or expected disinflation in the economy just as much."
- More Adani pain -
The news pushed all three main indexes on Wall Street higher, with the Nasdaq up two percent -- tech firms prefer a low interest rate environment.
However, after a promising start Thursday, Asian markets drifted through the day.
Tokyo, Sydney, Seoul, Wellington and Taipei rose but Hong Kong fell with Singapore, Manila and Bangkok, while Shanghai was flat.
Mumbai fluctuated despite another hefty sell-off in tycoon Gautam Adani's empire, with trading in flagship firm Adani Enterprises and five others suspended after they lost 10 percent. Adani Enterprises had plunged 28.45 percent on Wednesday.
The losses came after the group cancelled a multi-billion-dollar stock sale in reaction to the across-the-board collapse.
Adani's empire has lost more than $100 billion following explosive allegations of accounting fraud last week by US short-seller Hindenburg Research that the firm has rejected.
London, Paris and Frankfurt rose at the open.
On currency markets, the dollar struggled to recover from Wednesday's losses against the yen, pound and euro in reaction to the softer tone from the Fed.
Forex traders will now turn their attention to policy decisions by the Bank of England and the European Central Bank later in the day.
They come after figures Wednesday showed eurozone inflation slowed much more than expected in December thanks to a drop in energy prices.
However, Thornburg Investment Management's Ali Hassan warned the battle against inflation had not yet been won.
"An easing in financial conditions (that is, lower market interest rates, tighter spreads, higher equity prices) is counterproductive to controlling inflation," he said in a note.
"The Fed will likely have to start more hawkish talk in order to walk back Powell's comments on financial easing."
Oil prices rose in Asian trade, helped by the weaker dollar, easing concerns about the economic outlook in light of the Fed remarks and hopes for China's recovery.
The gains helped both main contracts bounce back after tumbling around three percent Wednesday on the back of data showing a pick-up in US stockpiles that dampened demand optimism.
- Key figures around 0820 GMT -
Tokyo - Nikkei 225: UP 0.2 percent at 27,402.05 (close)
Hong Kong - Hang Seng Index: DOWN 0.5 percent at 21,958.36 (close)
Shanghai - Composite: FLAT at 3,285.67 (close)
London - FTSE 100: UP 0.3 percent at 7,783.97
Dollar/yen: DOWN at 128.66 yen from 128.90 yen on Wednesday
Euro/dollar: UP at $1.0998 from $1.0995
Pound/dollar: DOWN at $1.2374 from $1.2378
Euro/pound: UP at 88.85 pence from 88.76 pence
West Texas Intermediate: UP 0.4 percent at $76.68 per barrel
Brent North Sea crude: UP 0.3 percent at $83.07 per barrel
New York - Dow: UP less than 0.1 percent at 34,092.96 (close)
dan/qan
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