Fed Trims Bond-Buying Plan By Another $10 Billion

The Federal Reserve voted to trim its bond-buying program by a further $10 billion on Wednesday, brushing off data showing the U.S. economy slowed to a crawl in the first three months of the year.

Federal Open Market Committee members voted unanimously to reduce the amount of cash it will inject into the economy for the fourth straight meeting, to $45 billion a month from $55 billion.

Policy makers think the economy will pick up for the rest of the year following the weather-related first quarter lull.

The Commerce Department said earlier today that gross domestic product inched up by just 0.1 percent in the first quarter of 2014 compared to the 2.6 percent increase in GDP in the fourth quarter of 2013.

However, “Information received since the Federal Open Market Committee met in March indicates that growth in economic activity has picked up recently, after having slowed sharply during the winter in part because of adverse weather conditions. Labor market indicators were mixed but on balance showed further improvement,” the Fed’s statement read.

Concerns about low inflation kept the Fed from making an even larger reduction in the bond-buying plan.

“The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance,” the Fed said.

Unlike last month’s meeting, there was little drama in this week’s two-day Fed meeting.

After much debate, the Federal Open Market Committee in March decided to shelve its 6.5 percent unemployment threshold for hiking interest rates.

With that move out of the way, the Fed aims to gradually wind down the asset purchase plan by the end of this year, and keep the benchmark rate interest rate at zero well into 2015.

“It likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.” the Fed said.

Published: 2014-04-30 19:15:00 UTC+00

Fed Trims Bond-Buying Plan By Another $10 Billion