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Fed leaves key US interest rate unchanged, notes slowing investment

The Fed statement could suggest the central bank thinks the risk of an overheating economy has retreated (AFP Photo/Brendan Smialowski)

Washington (AFP) - The US Federal Reserve kept the benchmark lending rate unchanged on Thursday, highlighting the continued strong performance of the economy but also pointing to a slowdown in business investment.

The central bank repeated that it expected "further gradual increases" in the key interest rate as the economy continues to expand but the statement gave no clear signal on whether it would have to move more aggressively to head off inflation.

In fact, it might be read as a sign the Fed believes the risk the economy will overheat may be retreating.

The policy-setting Federal Open Market Committee kept the federal funds rate at 2.0-2.25 percent at the conclusion of a two-day policy meeting and noted that inflation was running close to the central bank's two percent target.

Economists almost unanimously expect the fourth rate increase of the year in December but with a recent report showing wages finally beginning to rise they are watching for indications about the likely pace of rate hikes in 2019.

The Fed noted the economy "has been rising at a strong rate," with solid job gains, falling unemployment and household spending that is "growing strongly."

But markets will dissect a notable change in the FOMC's language, saying "business fixed investment has moderated from its rapid pace earlier in the year."

That could be viewed as an indication the Fed could move more cautiously, with fewer than the expected three rate hikes next year.

Or it might be read as the consequence of President Donald Trump's trade confrontations, which the Fed previously has cited as a factor undermining business confidence and investment plans, as tariffs increase costs.

Trump has repeatedly attacked Fed Chairman Jerome Powell, saying the central bank is raising rates too aggressively.