Fed holds interest rates steady, says economy remains on track

Fed holds interest rates steady, says economy remains on track

FILE PHOTO: The Federal Reserve headquarters in Washington September 16 2015. REUTERS/Kevin Lamarque/File Photo/File Photo
WASHINGTON: The U.S. Federal Reserve held interest rates steady on Thursday and said ongoing strong job gains and household spending had kept the economy on track."The labor market has continued to strengthen and ... economic activity has been rising at a strong rate," the Fed said in its latest policy statement, leaving intact its plans to continue raising rates gradually.
The statement reflected little change in the U.S. central bank's outlook for the economy since the last policy meeting in September, with inflation remaining near its 2 percent target, unemployment falling and risks to the economic outlook appearing to be "roughly balanced."Policymakers, however, noted that business investment had "moderated from its rapid pace earlier in the year," a possible drag on future economic growth.Financial markets had expected the Fed to hold its benchmark overnight lending rate steady in the current range of 2.00 percent to 2.25 percent."The only surprise here is that they weren't more hawkish," said Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management in New York. "There were a couple words that were more muted – that business investment had 'moderated' from its earlier pace. But apart from that they have not signaled any warning signs at all."
The dollar weakened modestly against the euro and Japanese yen, but other financial markets were little changed from levels ahead of the Fed's statement. Stocks remained mixed after Wednesday's substantial rally following the results of the U.S. midterm elections, in which Democrats captured control of the U.S. House of Representatives but Republicans held the Senate.U.S. Treasury yields largely remained near their highs on the day.The Fed has raised rates three times this year and is widely expected to do so again in December.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 roughly 2 percent annual growth pace the Fed and many economists regard as the underlying trend.
But Fed policymakers also have begun debating whether the economy has reached a plateau as the stimulus from the Trump administration's US$1.5 trillion tax cut package and increased federal spending begin to fade.The Fed's policy statement did not explicitly take stock of recent volatility in U.S. equity markets that led to a selloff in October, or address the possibility of a slowdown in global growth next year.There were no updated economic forecasts released on Thursday and Fed Chairman Jerome Powell was not scheduled to hold a news conference.The Fed's policy decision was unanimous.(Reporting by Howard Schneider and Dan Burns; Editing by Paul Simao)
Source: Reuters
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