US Fed Lowers Growth Forecast Between 2.1 and 2.3%

The US Federal Reserve has cut its growth forecast for 2014 because of the harsh winter weather.

The central bank is now predicting growth of between 2.1% and 2.3% for this year, down from its March forecast of 2.8% to 3%.

However in its accompanying statement, the bank said that economic activity had “rebounded in recent months”.

As expected, it has also trimmed back its stimulus programme by $10bn (£5.9bn) a month to $35bn.

The central bank has been buying bonds to keep long-term interest rates low and encourage banks to lend.

This is the fifth cut in purchases since December and it is expected to stop buying bonds altogether by the autumn.

However the chair of the bank, Janet Yellen, stressed that this was not a pre-set programme and if necessary it would change course.

As far as interest rates go, the bank said they would remain near zero “for a considerable time” after the bond buying ends.

Questioned as to how long that might be, Ms Yellen said there was “no mechanical formula” and that it “depends on how the economy progresses”.

via BBC

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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