The Federal Reserve said on Wednesday it would cut down its asset purchases to US$25 billion monthly, down from US$85 billion at its peak, while issuing a more upbeat assessment of inflation, jobs and the economy, the Wall Street Journal reported.
Earlier in the day, the Commerce Department said the economy grew at a 4 percent annual rate in the three months to June, bouncing back after a 2.1 percent contraction in the first quarter due to bad weather, the report said.
“Economic activity rebounded in the second quarter,” the Fed said in its July policy statement, noting the labor market is improving, the jobless rate falling and inflation moving closer to its 2 percent target.
But while the jobless rate declined to 6.1 percent in June, far faster than anticipated, the Fed also said there is still a significant slack in the labor market, according to the newspaper.
It reiterated that short-term rates will stay low for “considerable time” after its bond buying program ends by October. The central bank has kept the benchmark fed funds rate near zero since December 2008.
Fed chief Janet Yellen has said the timing of interest-rate increases would depend on how quickly inflation and the labor market moved toward the Fed’s long-run goals, the report said.
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