Fed keeps interest rates unchanged, acknowledges economic strength

The Federal Reserve held interest rates steady on Wednesday but left the door open to a further increase in borrowing costs in a policy statement that acknowledged the US economy’s surprising strength but also nodded to the tighter financial conditions faced by businesses and households.

“Economic activity expanded at a strong pace in the third quarter,” the US central bank said in a policy statement after a two-day meeting in which officials unanimously agreed to leave the benchmark overnight interest rate in the 5.25 percent-5.50 percent range where it has been since July.

The language marked an upgrade to the “solid pace” of activity the Fed saw as of its September meeting, and followed on recent data that showed US gross domestic product grew at a 4.9 percent annual rate in the third quarter.

US stocks edged higher following the release of the policy statement while the US dollar pared gains against a basket of currencies. US Treasury yields fell to session lows.

“The statement leans to the dovish side,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “The fact that they left rates unchanged for the second time in a row suggests the Fed might leave rates unchanged in December. And if they do, that means the Fed is done.”