Fed leaves rates unchanged, says U.S. economy strong

WASHINGTON (Reuters) – The U.S. Federal Reserve held steady interest rates in the United States.

Business investment can be a key to rising productivity and future growth, and the fact that it has been "moderated from its speed", "has the Fed said, was the only cautionary note in a policy statement that alled strong job gains and household spending, and a "strong rate" of overall economic activity.

"The labor market has continued to grow at a high rate," the U.S. central bank said, leaving intact its plans to continue raising rates at a gradual pace. The Fed has hiked rates in the United States.

The statement in the Fed's outlook on the economy. Inflation remained near its 2 percent target, unemployment fell, and risks to the economic outlook were still felt to be "roughly balanced."

Policymakers, however, have taken particular note of the moderation in business investment, an important component of GDP that can be upgraded as they develop equipment and processes.

Boosting investment is one of the main objectives behind the Trump administration's move to reduce the corporate tax rate as part of its restructuring of the tax code at the end of 2017.

After adding four-tenths of a percentage point to economic growth in the first six months of the year, lagging investment in "nonresidential structures" trimmed a quarter of a percentage point in the annualized growth rate for the third quarter.

Financial markets, which had expected the Fed to hold its benchmark overnight lending rate in the current range of 2.00 percent to 2.25 percent this week, ticked lower after the statement was released.

After a stock market may be waning, some analysts expected the Fed to possibly signal its next rate increase.

Yet December still seems firmly in play.

"Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management in New York. "There have been more muted – that business investment had 'moderated' from its earlier pace. But apart from that they have not signaled any warning signs at all. "

U.S. stocks, which had rallied broadly on Wednesday after the results of the U.S. congressional elections, turned down the rate of its rate increases.

The dollar also weakened against the euro and yen and U.S. The 10-year Treasury note yield, a benchmark for both consumer and business borrowing costs, was 3.23 percent, around the highest since 2011.

FADING STIMULUS

Data released in late October showed the U.S. economy grew at a 3.5 percent annual rate in the third quarter, well above the 2 percent annual growth rate at the Fed and many economists at the underlying trend.

Purpose Fed policymakers also have begun debating whether the economy has reached a plateau as the stimulus from the Trump administration's $ 1.5 trillion tax cut package and increased federal spending.

The Fed's policy statement did not explicitly take into account the recent volatility in U.S. equity markets that led to the selloff in October, or the possibility of a slowdown in global growth next year.

Jerome Powell was not scheduled to hold a news conference.

The Fed's policy decision was unanimous.