The Federal Reserve said the economy is gaining momentum as consumers spend more, and said it would continue to trim the pace of bond purchases.
"Growth in economic activity has picked up recently, after having slowed sharply," the Federal Open Market Committee said today in a statement following a meeting in Washington. "Household spending appears to be rising more quickly."
The committee pared monthly asset buying to $45 billion, its fourth straight $10 billion cut, and said further reductions in "measured steps" are likely.
Fed Chair Janet Yellen is winding down record stimulus as the world's largest economy shows signs of rebounding from a first-quarter standstill. At the same time, the Fed repeated that it's likely to keep the benchmark interest rate near zero for a "considerable time" after bond purchases end.
Fed officials repeated long-term inflation expectations remain stable. The central bank's preferred gauge of consumer prices climbed 0.9% in the year through February and hasn't exceeded the Fed's 2% goal since March 2012.
Bond purchases will be divided between $25 billion in Treasuries and $20 billion in mortgage debt.
The Fed kept its forward guidance on borrowing costs, saying it will consider a "wide range of information" in deciding when to raise the benchmark federal funds rate, or the cost of overnight loans among banks.
The decision was unanimous. The Fed acted after a government report today showed the economy slowed more than forecast in the first quarter as harsh winter weather chilled investment and exports dropped. The 0.1% annual pace of expansion followed a 2.6% gain in the fourth quarter.
Consumer Spending
Consumer spending remained strong at a 3% pace, today's report showed, and recent data on payrolls, manufacturing and retail sales indicate the economy is gaining strength. Growth is forecast by economists to accelerate to a 3% pace this quarter.
Private employment in March exceeded the pre-recession peak for the first time as payrolls excluding government agencies rose by 192,000 workers.
"We're definitely seeing a pickup from what was an unexpectedly weak first quarter," Keith Hembre, who helps oversee $120 billion as chief economist at Nuveen Asset Management LLC in Minneapolis, said before the Fed statement. Hembre is a former researcher at the Minneapolis Fed.
