The U.S. Federal Reserve announced on Wednesday that it will continue to trim its monthly bond purchase program by 10 billion U.S. dollars to 25 billion dollars since August, staying on track to end the program later this year.
It marked the Fed's sixth consecutive cut of its monthly stimulus program, as the central bank saw the economic activity was gaining momentum in recent months after unexpectedly shrinking in the first quarter.
"Information received since the Federal Open Market Committee met in June indicates that growth in economic activity rebounded in the second quarter," the Fed said in a statement released after a two-day meeting of the committee, the Fed's chief body for monetary policy.
The central bank said "labor market conditions improved," with the unemployment rate "declining further" to 6.1 percent in June, the lowest level since September 2008.
The central bank also noted household spending "appears to be rising modestly" and business fixed investment "is advancing," while the recovery in the housing sector "remains slow."
The Commerce Department reported Wednesday that the U.S. economy grew at an annual rate of 4.0 percent in the second quarter after contracting 2.1 percent in the first three months this year. That confirmed the Fed's view that the world's largest economy would strongly bounce back after the severe winter weather ended.
The Fed has stuck to its plan to taper its asset purchase program by 10 billion dollars every policy meeting this year. It is on track to end the program in October if the U.S. economy progresses as expected, according to minutes of the Fed's last monetary policy meeting.
In the Wednesday statement, the Fed reiterated that it will be appropriate to keep its benchmark short-term interest rate near zero for "a considerable time" after the asset purchase program ends.
But Charles Plosser, president of the Federal Reserve Bank of Philadelphia, dissented, arguing that this guidance on interest rates does not reflect the "considerable economic progress" that has been made toward the central bank's goals, according to the statement.
Fed Chair Janet Yellen said last month that the timing of first interest rate increase would depend on the progress of the economy and how policymakers assess it, based on a variety of indicators. Most market participants predict the Fed will wait until mid-2015 to start raising interest rates.
U.S. economy grows 4 pct in Q2
The U.S. economy grew at an annual rate of 4.0 percent in the second quarter after unexpectedly shrinking in the first three months this year, the U.S. Commerce Department announced Wednesday.
The figure was better than economists' expectation of 3 percent and confirmed the view that the world's largest economy would strongly bounce back after the severe winter weather ended.
The strong growth in the second quarter primarily reflected positive contributions from personal consumption, private inventory investment, non-residential fixed investment, state and local government spending, and residential fixed investment, the Commerce Department said.
Personal consumption, which accounts for about 70 percent of overall economic activity, grew at a pace of 2.5 percent in the second quarter from 1.2 percent in the previous quarter, adding 1.69 percentage points to the overall economic growth.
The change in private inventories also added 1.66 percentage points to growth during the second quarter, after subtracting 1.16 percentage points from growth in the proceeding period.
Trade deficit sliced off 0.61 percentage point of the second-quarter growth, but smaller than the severe contraction of 1.66 percentage points in the first quarter.
Non-residential fixed investment increased 5.5 percent during the April-June period after gaining 1.6 percent in the previous quarter, with spending on structures up 5.3 percent and investment on equipment up 3.1 percent.
Residential fixed investment increased 7.5 percent in the second quarter, compared with 5.3 percent decline in the first quarter, indicating the housing recovery gradually gained momentum.
While federal government spending fell 0.8 percent and became a drag on economic growth during the quarter, state and local government spending increased 3.1 percent, adding 0.35 percentage point to the overall economic growth.
The department also revised the estimate of the first quarter contraction to 2.1 percent, compared to the more severe 2.9 percent previously reported. But it was still the worst performance in five years.
The Federal Reserve began a two-day monetary policy meeting Tuesday and was widely expected to continue tapering its asset purchase program by another 10 billion U.S. dollars. The Fed is currently buying 35 billion U.S. dollars of U.S. Treasuries and mortgage-backed securities a month.
The central bank is on track to end the asset purchase program in October if the U.S. economy progresses as expected, according to the minutes of the Fed's last monetary policy meeting.
Federal Reserve Chair Janet Yellen said last month that it would require a "very significant change" in the economic outlook in the next few months to alter this strategy.
