Fed stays the course on bond buying The US Federal Reserve said the world's largest economy is still expanding at a moderate pace in a statement that suggests a slowing of asset purchases in December or January is still under consideration. The rate-setting Federal Open Market Committee made no changes to policy at its October meeting, keeping its asset purchases steady at $85bn a month, but the statement implied it did not see a lot of damage from a three-week government shutdown earlier this month. US equities declined from record territory, bond yields inched higher while the dollar attracted buyers in the wake of the FOMC policy statement. The S&P 500 was down 0.8 per cent at 1,758.12, after closing at a record high of 1,771.95 on Tuesday. The yield on 10-year Treasury notes rose 3 basis points to 2.53 per cent, while the dollar index rose 0.3 per cent as the euro dropped 0.2 per cent to $1.3710. Bret Barker, portfolio manager at TCW said the negative reaction in equities and Treasury bonds reflected markets "hitting the pause button" after a big rally in prices in recent weeks. Markets are a little overdone. Expectations were too dovish heading into the meeting and we have seen a big rally of 50 basis points since September in 10-year Treasury yields. "The odds are pretty low on a December taper," added Mr Barker. Although markets have assumed the Fed will not "taper" its asset purchases until March, the statement implied it could still slow its asset purchases earlier than that - perhaps as early as its December meeting - if the economic data justified it. The Fed surprised markets in September by choosing to keep purchases on hold. That prompted a big fall in market interest rates, which had risen after Fed communications in June and July suggested it was close to a taper, and a global rally in risky assets. Combined with the effects of the shutdown - which has scrambled the economic data for October - markets have assumed the September decision meant the Fed was automatically on hold for some months. But October's statement suggests that is not necessarily correct. In the most notable change in the statement, the Fed eliminated a sentence from September saying that tighter financial conditions - Fed code for higher market interest rates - could lead to slower improvement in the economy. Scrapping the sentence suggests it is now comfortable with market interest rates. It also kept September's language that the economy is expanding at a "moderate" pace, choosing not to downgrade it to "modest," although it noted that the housing sector has slowed somewhat in recent months. However, the Fed pointedly said that its judgment was based on "available data," indicating that it could yet change as more detailed information for October becomes available. The FOMC voted for the decision by a majority of 9-1. Esther George, the president of the Kansas City Fed, dissented because she was concerned about the risk of future economic and financial imbalances. "We still think it would take a very significant set of positive surprises in the economic data over the next six weeks for the Fed to give serious consideration to a cutback in asset purchases before next year," said Lou Crandall, economist at Wrightson Icap. Data earlier in the day showed that the US private sector added 130,000 jobs during October in a sign that the government shutdown had modest effects on the rest of the economy. ADP, the payroll processor, said that private jobs growth had fallen well below the recent average as the government shutdown for almost three weeks earlier in the month but the figures did not show a catastrophic slump in employment. The question for the US Federal Reserve will be whether the weakness in October is a one-off or whether the drag on jobs growth continues in the months ahead. "The government shutdown and debt limit brinksmanship hurt the already softening job market in October," said Mark Zandi, the chief economist of Moody's Analytics, which compiles the ADP report.