Feedback
Business

Fed Shows Faith in Economy, Will Reduce Bond Purchases

Despite a backdrop of slowing first-quarter economic activity, the Federal Reserve voted Wednesday to continue reducing its monthly stimulus program.

In a move that met market expectations, the U.S. central bank cut back its bond purchases to $45 billion a month, which is $40 billion less than the original total in a program that has swelled the Fed balance sheet to more than $4.3 trillion.

Fed tapers $10 billion 0:37

The decision came as recent signs showed that first-quarter growth was even weaker than expected. The Commerce Department reported Wednesday that gross domestic product increased just 0.1 percent, a full percentage point below expectations.

Yet the Fed statement did not reflect substantial concerns, and in fact, reflected consensus from economists who believe the slowdown will be short-lived and growth will accelerate.

"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," the statement from the Open Market Committee said. "Labor market indicators were mixed but on balance showed further improvement."