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US central bank cuts growth forecast for 2014 US central bank cuts growth forecast for 2014
(35 minutes later)
The US Federal Reserve has cut its growth forecast for 2014 due to the harsh winter weather.The US Federal Reserve has cut its growth forecast for 2014 due to 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%.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".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 a month to $35bn.As expected, it has also trimmed back its stimulus programme by $10bn a month to $35bn.
The central bank has been buying bonds to keep long-term interest rates low and encourage banks to lend.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.This is the fifth cut in purchases since December and it is expected to stop buying bonds altogether by the autumn.
However chairman Janet Yellen stressed that this was not a pre-set programme and if necessary it would change course. However the chair of the bank, Janet Yellen, stressed that this was not a pre-set programme and if necessary it would change course.
The Federal Reserve expects growth to pick up again in 2015, sticking to a prediction of 3% to 3.2% expansion. As far as interest rates go, the bank said they would remain near zero "for a considerable time" after the bond buying ends.
On inflation, Ms Yellen said she expected it to remain at or below the target of 2% until the end of 2016. Low inflation would enable the bank to keep interest rates low. Currently, they are not expected to rise until the middle of 2015.
'Steady as she goes'
The Federal Reserve expects growth to pick up again in 2015, sticking to its prediction of 3% to 3.2% expansion.
"Economic activity will expand at a moderate pace and labor market conditions will continue to improve gradually," the central bank said."Economic activity will expand at a moderate pace and labor market conditions will continue to improve gradually," the central bank said.
"Household spending appears to be rising moderately and business fixed investment resumed its advance.""Household spending appears to be rising moderately and business fixed investment resumed its advance."
Ms Yellen added in a press conference afterwards that "over the next two years, the projections for real GDP growth remain somewhat above the estimates of longer-run normal growth."
Kim Rupert from Action Economics in San Francisco said: "Steady as she goes, with respect to policy. [They] want to make sure the recovery is for real and is in place and are still maintaining a very accommodative posture."