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Home / Business / The Fed keeps interest rates unchanged, says the US economy strongly

The Fed keeps interest rates unchanged, says the US economy strongly



WASHINGTON (Reuters) – The US Federal Reserve kept interest rates stable on Thursday, but remained well on track to gradually cut its borrowing costs as it pointed to a healthy economy impacted only by a slowdown in business investment growth has been.

FILE PHOTO: The central bank headquarters in Washington, September 1

6, 2015. REUTERS / Kevin Lamarque / File Photo / File Photo

Business investment can be a key to increasing productivity and future growth and the fact that it " As the Fed said, the only warning note in a policy statement announcing strong job growth and budget spending and a "strong" macroeconomic activity was "moderated by its fast pace".

"The labor market has continued to strengthen and … economic activity has risen sharply," said the US Federal Reserve, leaving intact plans to gradually raise interest rates. The Fed raised interest rates three times this year and it is widely expected that this will be the case again in December.

Overall, the statement reflects little change in the Fed's outlook for the economy since its last political session in September. Inflation remained close to the 2% target, unemployment fell and the risks to the economic outlook were still perceived as being "about balanced".

However, policy makers noted the slowdown in corporate investment, which is an important component of GDP. They can reduce jobs as companies build new facilities and increase productivity as they improve facilities and processes.

Increasing investment has been one of the main goals of the Trump administration to reduce corporate tax rates as part of the restructuring of the tax code at the end of 2017.

After adding four tenths of a percentage point Economic growth in the first six months of the year reduced the annualized growth rate of the third quarter by a quarter of a percentage point.

Financial markets, which were expected to keep their Fed interest-rate lending rate in the current range of 2.00% to 2.25% this week, softened after the announcement.

Following a stock market slump in October and signs that both housing and corporate investment may slacken, some analysts expected the Fed to signal doubts about the next rate hike.

Nevertheless, December seems to be firmly in the game.

"The only surprise here is that they were not more hawks," said Boris Schlossberg, director of foreign exchange strategy at BK Asset Management, New York. "There were a few words that were rather subdued – that corporate investments were" moderated "compared to the previous pace, but otherwise they did not signal any warning signs at all."

US Stock prices following Wednesday's results the US Congress has recovered sharply, as the Fed statement did not indicate that the central bank could slow the pace of its interest rate hikes.

The dollar also weakened against the euro, and yields on the US dollar Government bonds held close to daily highs, with yields on 10-year Treasury bills, a benchmark for both consumer and corporate financing costs, at 3.23 percent, the highest since 2011.

FADING STIMULUS

Data released in late October showed that the US economy has grown by 3.5 percent annual rate in the third quarter, well above the annual growth rate around 2 percent, which the Fed and many economists consider the underlying trend.

But Fed decision makers have begun to debate whether the economy has reached a plateau, as the Trump government incentive has fallen by $ 1.5 trillion, easing government spending.

The Fed's statement of principles did not specifically take stock of recent stock market volatility that had led to a sell-off in October, and also addressed the possibility of slowing global growth next year.

No updated economic forecasts were released on Thursday and Fed Chairman Jerome Powell should not hold a press conference.

The political decision of the Fed was unanimous.

coverage by Howard Schneider, Jason Lange and Dan Burns; Editing by Paul Simao

Our Standards: The Thomson Reuters Trust Principles.

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