US Fed signals thawing of economy after winter chill

The US Federal Reserve said last night that growth had accelerated in the world's largest economy as it slowed asset purchases by another $10 billion to $45 billion-a-month.

Its decision to taper purchases and talk up the economy suggests the Fed is convinced underlying growth is still on track after a spell of weakness due to bad winter weather.

It implies the Fed will continue to reduce its asset purchases – which are designed to push down long-term interest rates and support the economy – at a pace of $10 billion-a-meeting until they end later this year.

"Growth in economic activity has picked up recently, after having slowed sharply during the winter in part because of adverse weather conditions," the rate-setting Federal Open Market Committee (FOMC) said in a statement that was otherwise little changed.

“Household spending appears to be rising more quickly,” the FOMC said. “Business fixed investment edged down, while the recovery in the housing sector remained slow.”

The central bank has shrugged off a weak start to the year that saw annualised growth fall to just 0.1 per cent in the first quarter of 2014. Its full year growth forecast of 2.9 per cent for 2014 now looks like a stretch, but the FOMC’s confident statement and continued taper suggest it does not think the outlook has changed much as a result.

– Copyright The Financial Times Limited 2014