Fed leaves prices unchanged, says the US economy strong

WASHINGTON (Reuters) – The US Federal Reserve kept its interest rate even on Thursday, but kept on track to gradually tighten borrowing costs, as it pointed to a healthy economy that was only ruined by a dip in the growth of business investment.

Business investment can be a key to increasing productivity and future growth, and the fact that it had "moderated from its fast tempo, "as Fed said, was the only precautionary note in a political statement speculating on strong job gains and household spending, and a" strong rate "of overall economic activity.

"The labor market has continued to strengthen and … economic activity has increased at high speed," said the US central bank, leaving intact plans to continue to increase prices gradually. Fed has hiked prices three times this year and is expected to do it again in December.

The statement overall reflected a slight change in the Fed's view of the economy since its last political meeting in September. Inflation remains close to its 2 percent target, unemployment fell, and the risk of economic prospects was still felt to be "about balanced."

However, politicians took special note of the moderation in business investment, an important part of GDP that can spin jobs because businesses build new facilities and increase productivity when upgrading equipment and processes.

The increase in investment was one of the main objectives of the Trump Administration's move to reduce corporate tax rates as part of the redeployment of the tax code by the end of 2017.

After adding four tenths of a percentage point to economic growth this year's six first months, reduced investment in "foreign structures" trimmed a quarter of a percentage point in annual growth for the third quarter.

The financial markets, which had expected Fed to keep their overnight overnight lending rates stable in today's reach of 2.00 percent to 2.25 percent a week, crossed lower after the statement was released.

Following a stock market route in October, indicating that housing and business investment can slow down, some analysts expect the Fed to potentially signal doubts about its next interest rate hike.

Still, December is still in play.

"The only surprise here is that they were not more Hawaiian," said Boris Schlossberg, Managing Director of Forex Market Strategy at BK Asset Management in New York. "There were a few words that were more muted – business investment had" moderated "from past pace. But apart from that, they have not signed any warning signs at all."

U.S. shares that had gone broad on Wednesday after the outcome of the US Congressional elections were lower when the Fed statement gave no indication that the central bank could slow the rate of interest rate hikes.

The dollar also weakened against the euro and yen and US treasury yields held close to today's highest. The 10-year government bond yield, a benchmark for both consumer and business loans, was 3.23 percent, approximately the highest since 2011.

FADING STIMULUS

Data released at the end of October showed that the US economy grew at 3.5 percent annual rate in the third quarter, well above the 2 per cent annual growth rate in line with the Fed, and many economists consider the underlying trend.

But Fed decision makers have also begun discussing whether the economy has reached a plateau as the stimulus from the Trump administration's $ 1.5 billion tax package and increased federal spending begin to fade.

The Fed Policy Statement did not explicitly reveal the recent volatility in US stock markets that led to sales in October or attack the possibility of a decline in global growth next year.

There were no updated economic forecasts released on Thursday, and the Fed rapporteur Jerome Powell was not scheduled to hold a press conference.

The federal political decision was unanimous.