* Fed says unemployment to decline under appropriate policy * U.S. GDP shows unexpected contraction in fourth quarter * Treasury sells $29 billion of 7-year notes By Chris Reese NEW YORK, Jan 30 U.S. Treasury debt prices traded little changed on Wednesday after the Federal Reserve said economic growth will proceed at a moderate pace and unemployment will gradually decline under appropriate monetary policy. The central bank also reiterated in a statement following its two-day policy meeting it will continue its current economic stimulus programs, buying mortgage and U.S. government debt, until the labor market improves "substantially." "The statement came out pretty much not only as I expected, but as the market expected. No change in timing of the bond purchases; that's probably what most people are looking for. The market reacted in a way that said the Fed delivered what was expected - little movement," said Fred Dickson, chief market strategist at D.A. Davidson & Co in Lake Oswego, Oregon. Treasuries began the day trading lower as investors pushed for price concessions amid auctions of $99 billion of U.S. government debt this week. Prices of U.S. government debt briefly moved higher after data showing a surprise contraction in gross domestic product in the world's biggest economy in the fourth quarter. Prices returned to negative territory however as analysts pointed to some positive signs for economic growth in the components of the report, like rising consumer spending. "At the end of the day, slow growth matters if it means job hiring is slowing, and it does not look like job hiring is slowing," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York. Investors are now waiting for a key indicator of the health of the labor market in January non-farm payrolls data on Friday. Analysts polled by Reuters expect U.S. employers added 160,000 new jobs this month, up marginally from 155,000 new positions added in December. The unemployment rate is expected to be unchanged from December at 7.8 percent. The Treasury on Thursday sold $29 billion of seven-year notes, after having sold $35 billion of two-year notes on Monday and $35 billion of five-year notes on Tuesday. Investors typically try to push Treasuries prices down around the time of such auctions. Benchmark 10-year notes on Wednesday traded 1/32 lower in price with the yield little changed from late Tuesday at 2.00 percent. The yield reached as high as 2.04 percent on Wednesday. Yields on benchmark notes have been testing the 2 percent level since Monday, breaching that figure for the first time since April.