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Fed leaves rates unchanged, says US economy strong

WASHINGTON (Reuters) – The U.S. Federal Reserve held interest rates steady on Thursday but remained on track to keep gradually tightening borrowing costs, as it pointed to a healthy economy that was marred only by a dip in the growth of business investment. FILE PHOTO: The Federal Reserve headquarters in Washington September 16 2015. REUTERS/Kevin…

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Fed leaves rates unchanged, says US economy strong

WASHINGTON (Reuters) – The U.S. Federal Reserve held interest rates steady on Thursday but remained on track to keep gradually tightening borrowing costs, as it pointed to a healthy economy that was marred only by a dip in the growth of business investment.

FILE PHOTO: The Federal Reserve headquarters in Washington September 16 2015. REUTERS/Kevin Lamarque/File Photo/File Photo

Business investment can be a key to rising productivity and future growth, and the fact that it had “moderated from its rapid pace,” as the Fed said, was the only cautionary note in a policy statement that touted strong job gains and household spending, and a “strong rate” of overall economic activity.

“The labor market has continued to strengthen and … economic activity has been rising at a strong rate,” the U.S. central bank said, leaving intact its plans to continue raising rates at a gradual pace. The Fed has hiked rates three times this year and is widely expected to do so again in December.

The statement overall reflected little change in the Fed’s outlook for the economy since its last policy meeting in September. Inflation remained near its 2 percent target, unemployment fell, and risks to the economic outlook were still felt to be “roughly balanced.”

Policymakers, however, took particular note of the moderation in business investment, an important component of GDP that can spin off jobs as companies build new facilities, and raise productivity as they upgrade equipment and processes.

Boosting investment was one of the main objectives behind the Trump administration’s move to reduce the corporate tax rate as part of its restructuring of the tax code at the end of 2017.

After adding four-tenths of a percentage point to economic growth in the first six months of the year, lagging investment in “nonresidential structures” trimmed a quarter of a percentage point in the annualized growth rate for the third quarter.

Financial markets, which had expected the Fed to hold its benchmark overnight lending rate steady in the current range of 2.00 percent to 2.25 percent this week, ticked lower after the statement was released.

After a stock market rout in October and signs that both housing and business investment may be waning, some analysts expected the Fed to possibly signal doubt about its next rate increase.

Yet December still seems firmly in play.

“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.”

U.S. stocks, which had rallied broadly on Wednesday after the results of the U.S. congressional elections, turned lower as the Fed’s statement offered no indication the central bank might slow the pace of its rate increases.

The dollar also weakened against the euro and yen and U.S. Treasury yields held near the day’s high. The 10-year Treasury note yield, a benchmark for both consumer and business borrowing costs, was 3.23 percent, around the highest since 2011.

FADING STIMULUS

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 $1.5 trillion tax cut package and increased federal spending begin to fade.

The Fed’s policy statement did not explicitly take stock of the recent volatility in U.S. equity markets that led to the 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, Jason Lange and Dan Burns; Editing by Paul Simao

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Oil extends slide from 7 percent slump the day before as outlook darkens

SINGAPORE (Reuters) – Oil markets slipped again on Wednesday, extending losses from a 7 percent plunge the previous session as surging supply and the specter of faltering demand scared off investors. FILE PHOTO: Oil pours out of a spout from Edwin Drake’s original 1859 well that launched the modern petroleum industry at the Drake Well…

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Oil extends slide from 7 percent slump the day before as outlook darkens

SINGAPORE (Reuters) – Oil markets slipped again on Wednesday, extending losses from a 7 percent plunge the previous session as surging supply and the specter of faltering demand scared off investors.

FILE PHOTO: Oil pours out of a spout from Edwin Drake’s original 1859 well that launched the modern petroleum industry at the Drake Well Museum and Park in Titusville, Pennsylvania U.S., October 5, 2017. REUTERS/Brendan McDermid/File Photo

U.S. West Texas Intermediate (WTI) crude oil futures were at $55.50 per barrel at 0514 GMT, down 19 cents from their last settlement.

International benchmark Brent crude oil futures LCOc1 were down 22 cents at $65.25 per barrel.

Crude oil has lost over a quarter of its value since early October in what has become one of the biggest declines since prices collapsed in 2014.

The slump in spot prices has turned the entire forward curve for crude oil upside down.

Spot prices in September were significantly higher than those for later delivery, a structure known as backwardation that implies a tight market as it is unattractive to put oil into storage.

By mid-November, the curve had flipped into contango, when crude prices for immediate delivery are cheaper than those for later dispatch. That implies an oversupplied market as it makes it attractive to store oil for later sale.

Oil markets are being pressured from two sides: a surge in supply and increasing concerns about an economic slowdown.

U.S. crude oil output from its seven major shale basins is expected to hit a record of 7.94 million barrels per day (bpd) in December, the U.S. Department of Energy’s Energy Information Administration (EIA) said on Tuesday.

That surge in onshore output has helped overall U.S. crude production C-OUT-T-EIA hit a record 11.6 million bpd, making the United States the world’s biggest oil producer ahead of Russia and Saudi Arabia.

Most analysts expect U.S. output to climb above 12 million bpd within the first half of 2019.

“This will, in our view, cap any upside above $85 per barrel (for oil prices),” said Jon Andersson, head of commodities at Vontobel Asset Management.

The surge in U.S. production is contributing to rising stockpiles.

U.S. crude stocks climbed by 7.8 million barrels in the week ending Nov. 2 to 432 million as refineries cut output, data from industry group the American Petroleum Institute showed on Tuesday.

The producer cartel of the Organization of the Petroleum Exporting Countries (OPEC) has been watching the jump in supply and price slump with concern.

OPEC has been making increasingly frequent public statements that it would start withholding crude in 2019 to tighten supply and prop up prices.

“OPEC and Russia are under pressure to reduce current production levels, which is a decision that we expect to be taken at the next OPEC meeting on Dec. 6,” said Andersson.

That puts OPEC on a collision course with U.S. President Donald Trump, who publicly supports low oil prices and who has called on OPEC not to cut production.

Reporting by Henning Gloystein; Editing by Joseph Radford

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1.1 million Marylanders expected to travel for Thanksgiving

More than 1.1 million Marylanders will travel for the Thanksgiving holiday weekend, the most in more than a dozen years, according to AAA Mid-Atlantic projections.It’s the fourth straight year the auto club has projected Thanksgiving travel volumes of more than 1 million people in Maryland. Roughly one in every six state residents are expected to…

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More than 1.1 million Marylanders will travel for the Thanksgiving holiday weekend, the most in more than a dozen years, according to AAA Mid-Atlantic projections.

It’s the fourth straight year the auto club has projected Thanksgiving travel volumes of more than 1 million people in Maryland. Roughly one in every six state residents are expected to go away between Wednesday and Sunday of the holiday weekend.

“As the economy continues to grow, along with wages, disposable income and household wealth, many Marylanders are feeling enough confidence to not hold back on spending, which is evident by this year’s robust holiday travel forecast,” AAA Mid-Atlantic spokeswoman Ragina Cooper Averella said in a statement.

Most will drive, and low gas prices could be playing a role in their decision, she said.

After hitting a high of $2.99 per gallon of regular unleaded gasoline over Memorial Day weekend, the average price at the pump in Maryland had fallen to $2.37 as of Tuesday, according to AAA.

Prices have fallen 30 cents in the last month and 7 cents in the past week. The current average is within 5 cents of the lowest price this year, set March 9.

“Prices could drop even lower, especially if there is a surge in gasoline production after refiners fully restart units from the fall maintenance season, and oil prices continue to remain stable,” Averella said.

If possible, the 91 percent of travelers who are driving to their destinations should try to avoid the early evening commute period next week, which is expected to be the most congested, according to AAA, which worked with INRIX, a global mobility analytics company, on its projections. Sunday is expected to be busy, too.

To avoid the gridlock, Troy Brad, 30, of Glen Burnie, plans to leave for Virginia before sunrise Wednesday, between 5 and 6 a.m.

He’ll spend Thanksgiving with his children and his mother’s and sister’s households, about a dozen family members in total, at a time-share in Massanutten, Va., they bought this summer.

“The whole wolf pack,” Brad called his crew. “It’s going to be a nice family event.”

Kristina Turner will be one of more than 82,000 Marylanders expected to fly for Thanksgiving — although she is taking a little longer than a holiday weekend for her trip.

The 24-year-old, who lives in Baltimore’s Mount Vernon neighborhood, is headed to Portugal Tuesday for a three-week trip to Barcelona, Paris, London and Brussels with her boyfriend, Sergeant First Class Marion Brawley, during his time off from his deployment in Afghanistan, she said.

Turner said she is more excited to see Brawley than she is worried about long wait times at Baltimore/Washington International Thurgood Marshall Airport.

“It’s overdue!” she said.

Nearly 22,000 are expected to travel by train, bus, boat or other mode of transportation, which is roughly flat compared with last year, AAA said.

cmcampbell@baltsun.com

twitter.com/cmcampbell6

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Business

Japan’s Economy Shrank in July-September as Trade Falls

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