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June 29, 2017

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Shrugging off Q1 stall, Fed again cuts stimulus

WASHINGTON -- The U.S. economy nearly froze in the glacial first quarter, but emerging signs of vigor kept the Federal Reserve on its stimulus taper track Wednesday.

The Fed shrugged off the shockingly weak 0.1 percent annual growth rate of the past quarter reported earlier in the day by the Commerce Department.

The Federal Open Market Committee, led by Fed Chair Janet Yellen, concluded after a two-day meeting that the economy remains in fairly good shape, able to handle the ongoing cutback in its bond-buying stimulus program, but still in need of a near-zero interest rate.

Economic activity "has picked up recently after having slowed sharply during the winter in part because of adverse weather conditions," the FOMC said in its policy statement.

The first-quarter slowdown from a 2.6 percent expansion in the fourth quarter of 2013 was much worse than analysts expected; the average estimate was for a 1.0-percent rate.

But this was a rear-view mirror look at the economy, and for the Fed, most of the recent signposts were pointing to "moderate" growth and a gradual improvement in the jobs market.

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