US Fed Predictable Taper Speaks of Confidence in the Economy

The Federal Reserve on Wednesday looked past a dismal reading on first quarter U.S. growth and gave a mostly upbeat assessment of the economy’s prospects as it announced another cut in its massive bond-buying stimulus.

Recent information “indicates that growth in economic activity has picked up … after having slowed sharply during the winter in part because of adverse weather conditions,” the central bank said in a statement after a two-day meeting.

“Household spending appears to be rising more quickly,” it added, although it said business investment “edged down.”

The Fed said it would reduce its monthly bond purchases to $45 billion from $55 billion, a widely expected decision that keeps it on track to end the program as soon as October. The decision was unanimous.

Just hours before the statement was released, the government reported that the economy grew at only a 0.1 percent annual rate in the first quarter, but the Fed pinned its hopes on other recent data that has suggested activity is bouncing back.

Indeed, its statement was more upbeat than the one it issued after its last policy meeting on March 19. At that time, it noted that activity had slowed, although it said harsh winter weather was at play.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza