US Federal Reserve reduces 2014 growth forecast

The Federal Reserve has confirmed it expects growth of between 2.1 per cent and 2.3 per cent this year, down from its projection in March of 2.8 per cent to 3 per cent growth.

It also made a further reduction in the pace of its asset purchase program by $10bn to $35bn a month.

In a statement, the Federal Reserve said: “Information received since the Federal Open Market Committee met in April indicates that growth in economic activity has rebounded in recent months. Labor market indicators generally showed further improvement. The unemployment rate, though lower, remains elevated.”

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The committee warned that fiscal policy is “restraining” economic growth, although it acknowledged the extent of that restraint is diminishing.

It called the risks to the outlook for the economy and labour market as “nearly balanced”.

The statement added: “The committee recognizes that inflation persistently below its 2 per cent objective could pose risks to economic performance, and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term.”