The U.S. Federal Reserve has continued to taper its buying of U.S. bonds, reducing the amount it will buy to $35 billion U.S. a month, down by $10 billion.
Fed chair Janet Yellen spoke at a news conference Wednesday afternoon, after meeting with the Fed’s open market committee, pointing to considerable uncertainty over the U.S. economy
The Fed has downgraded its Gross Domestic Product growth expectations for the U.S. economy from the 2.8%-3% predicted in March to 2.1% to 2.3% in June.
The potential growth rate of the economy could be lower for some time, Yellen said, adding that she is not fully confident that the growth rate will stay on track.
But she said that all indicators do point to things getting better, including improved investment, improved labour market participation and increasing .
The Fed says growth in economic activity has rebounded in recent months after a grim first quarter and labour market indicators showed further improvement, estimated to hit 6% to 6.1% this year.
But it warned there is considerable slack in the labour market, household spending is merely moderate and the recovery in housing remains slow.
Its guidance on interest rates was largely unchanged.
Interest rates are not expected to move upwards until mid-2015, the same timing the Fed predicted in its last outlook.
While Bank of England Governor Mark Carney has indicated he may move to raise rates more quickly because of rising inflation, the Fed is still pointing to the risk of low inflation in the U.S. U.S. inflation is predicted at 1.5% to 1.7% by year-end.
Yellen was asked about this week's high consumer price index reading 2.1%, above the Fed's target rate of 2%.
She dismissed the higher readings as moved temporarily by high energy and airline prices.
"Recent readings CPI index have been on the high side, but the data we are seeing is noisy. Broadly speaking inflation is evolving along with the committee’s expectations," she said.
Yellen said the Fed would tell the public if it sees a chance that it might have to move faster on rates, but it makes its decisions based on a wide range of economic indicators, not just the two key ones of employment and inflation.
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