The Fed keeps rates constant, sees the economy on track

NEW YORK (Reuters) – The US Federal Reserve kept interest rates stable on Thursday and said that continued job gains and household spending kept the economy on track.

"The labor market has continued to strengthen and … economic activity has grown at a strong pace," the Fed said in its latest political statement, leaving its plans intact to continue to grow gradually.

The statement reflected little change in the US central bank's economic outlook from the last September political meeting, with inflation remaining close to its 2% target, falling unemployment and risks to the economic outlook that seemed "approximately balanced".

MARKET REACTION:

STOCK: The S & P 500 extended losses and fell 0.6%. The Dow was stable, so it lost 0.3%. BONDS: The yield on 10-year US Treasuries rose to 3.2355% and the 2-year yield rose to 2.9691%. The five-year yield has risen to the highest level in a decade.

FOREX: the dollar index rose 0.58 percent.

COMMENTS:

GENE TANNUZZO, GLOBAL VECTOR HEAD OF FIXED INCOME, COLOMBIA THREADNEEDLE, MINNEAPOLIS

"They did not take the opportunity to say that the financial conditions have been strengthened." The omission of this is perhaps slightly important, which smells of a situation in which I think they say: "We are waiting to make a & rsquo; excursion in December. We want to remain as close as the last statement. "There are people who are not satisfied with this statement because they were looking for a more accommodating tone after last month's market volatility, which is why we see increased short-term returns and stocks here, and they are still on track. open questions Are we close to a neutral level on tariffs? What will happen to the maximum size of the Fed's budget? There is nothing in the general data that would shake them from the current political path ".

PETER CARDILLO, ECONOMIST OF THE CAPITAL MARKET, SECURITY OF SPARTAN CAPITALS, NEW YORK:

"It was in line with what I was looking for, and that was what the market was looking for.

"They have quoted consumption spending as a strong, narrow labor market, and these two factors simply mean that tariffs have to move higher to reach at least a normalized level so that the economy does not overheat.

"You can see that the reaction in the market (stock) is essentially nothing, only mixed today, which came out of a strong demonstration yesterday.I think the Fed's message is this: the rates increase for the right reasons, not for the wrong reasons, so as not to negatively affect the actions ".

TIM GHRISKEY, CHIEF INVESTMENT STRATEGIST IN THE WORLD INVERNESS IN NEW YORK:

"There were a couple of changes from the previous declaration, nothing huge, and corporate fixed investments have admitted that its growth rate has been moderate, we see it in the data, this is really the only change of any meaning I do not think there's anything in here that says the Fed has to tighten in December, but they stay at a pace to tighten in December They've wired it very clearly – if you look historically while at the PCE core rate, they admit their medium-term targets have historically exceeded that percentage by an average of 0.9 percent, so we expect the Fed not only to move in December, but also two or three times in 2019. And all things being equal, they have achieved their goal.

"The stock market is always unstable and especially after the Fed's announcement, regardless of what has been said." Because of this line of fixed investments, it showed a bit of caution from the Fed on how to become too aggressive and the market welcomes him ".

RICK RIEDER, SOCIAL INVESTMENT MANAGER OF FIXED GLOBAL INCOME, BLACKROCK INC, NEW YORK, NY

"The only interesting change in today's statement was a reference to some moderation in corporate fixed investment The Fed is clearly starting to recognize a dynamic that has worked through the economy in the form of a tangible narrowing of financial conditions ".

QUINCY KROSBY, STRATEGIST OF THE CAPITAL MARKET, PRUDENTIAL FINANCIAL, NEWARK, NEW JERSEY

"The Fed did not mention the recent market shares, but they did note the slowdown in business investment.The expectation is that business investment will increase: one, due to a stronger economy, but above all because of the tax cuts for companies associated with the depreciation provided to companies for corporate spending, they have not said this, but many companies are trying to understand what is developing with the tariff issues with China. more business expenses, you have more help with the underlying economy – a slowdown in business spending can slow down stock market growth. "

"The question for the market is: does the Fed depend on data or is keeping a tight timetable for rate hikes in 2019? What would the Fed stop? It is clear from this statement today that they are looking at everything that could potentially slow the 39. Economics Business spending is important because companies that increase their investment contribute to raising GDP ".

JASON WARE, CHIEF INVESTMENT OFFICER, ALBION FINANCIAL, UTAH

"We've had some volatility around the relationship, but it seems to have been resolved, I do not think there's anything in terms of surprises." The only change that I think is noteworthy is that the growth in fixed investment for Businesses have been moderate, maybe it's a bit of attention, but it's hard to know what that means, it could be a whole bunch of factors, but what does this mean for Fed policy? I do not think it's a hawk, be it or dovish or neutral. "

ABBASI DEI GIOVANI, STRATEGIST GLOBAL MARKET, NTL FCSTONE, NEW YORK

"There is very little that is new with this statement.The fact that they are highlighting business investment has been moderated is certainly something to be considered.On the other hand, of course, household spending continues to grow strongly It shows you that the Fed understands that we continue to travel the path of an economy that is healthy and that is doing very well.

"We have a strong economy and business investment is something that we hope will change if we can get a trade agreement.

"For today, it's constant as we go in. Again, expectations should have us pretty well here, we knew what was going to happen and the Fed issued a benevolent statement, we should meander through day trading."

BRAD MCMILLAN, CHIEF INVESTMENT OFFICER, COMMONWEALTH FINANCIAL NETWORK, WALTHAM, MASS

"I read the statement and I saw the word strong three times." The only real whisper of concern was that business investment had been moderate. "

"What the general statement points out is that they are still on track to increase rates." December is in the plan and they see no reason to slow or stop the rate hike. "

"This is very much in line with what the market was expecting, I see the market today that is moving away a little from yesterday's strong gains." There is no real news in the statement. "

JAMIE COX, MANAGING PARTNER, HARRIS FINANCIAL GROUP, RICHMOND, VIRGINIA

"In addition to highlighting that fixed business investments have moderated some since the beginning of the year, this is the only part of the declaration that has really changed."

"The Fed acknowledged that there is a part of the economy that is slowing down a bit, but it does not discourage them from their language of gradual growth, not yet anyway." We'll see if this will materialize in December. when the expected increase in rates should take place ".

"There is really nothing to indicate on what the market had hoped, that there would have been a more accommodating position, so I think this is more than what we call a hawk trap".

"The markets have pushed the Fed, I think, to reconsider its rate hike path." In October, we had this very large market decline and some had speculated that it would influence the Fed's decision to increase rates in December. I've never thought about it, and the Fed rarely uses the short-term market volatility to dissuade it from its path, so I think it was a false hope, and that's a bit like her. "

TOM SIMONS, ECONOMIST OF MONEY MARKET, JEFFERIES, NEW YORK:

"There were very few changes to the declaration, which was likely to be as expected.The changes occurred are consistent with the GDP data released at the end of October.The characterization of employment and inflation are also consistent with the data and consistent with the continuing expectations of a rate hike in December There was no impact on the Treasury market.In addition to entering as expected, it is also along the continuum of the policy that has been communicated for a long time ".

BORIS SCHLOSSBERG, FX STRATEGY DIRECTOR, BK ASSET MANAGEMENT, NEW YORK

"The Fed has really kept its expectations – the only surprise here is that they were no longer hawks." There were a couple of words that were more subdued – that business investment had "moderated" from the previous pace. But other than that they did not signal any alarm signal. "

"The dollar had gathered in the statement, so it's not clear how much more juice will get with the Fed coming up as planned."

"There is no change in the Fed's policy – interest rates will continue to rise by 25 basis points until something changes."

Desk for the economy and the American market; + 1-646 223-6300

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