Investing.com - The Federal Reserve on Wednesday said it was leaving its benchmark interest rate unchanged at 0.00-0.25% and added it would cut its monthly bond-buying program to $25 billion from $35 billion.
The Fed said the overall economy is improving, though slackness remains in the labor market despite growth, which prompted monetary authorities to continue tapering its asset-purchasing program by $10 billion per policy meeting.
"Labor market conditions improved, with the unemployment rate declining further. However, a range of labor market indicators suggests that there remains significant underutilization of labor resources," the Fed's statement read.
Household spending is on the mend while business fixed investment is advancing, although recovery in the housing sector remains slow.
Fiscal policy continues to weigh on growth though the extent of which is diminishing, while consumer prices are stable.
"Inflation has moved somewhat closer to the Committee's longer-run objective. Longer-term inflation expectations have remained stable," the statement read.
"The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced and judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat."
The statement came hours after the Commerce Department reported that gross domestic product expanded at an annual rate of 4.0% in the three months to June, blowing past forecasts for a 3.0% reading. The contraction in the first quarter was revised to 2.1% from a previously reported 2.9%.
Personal consumption grew 2.5%, well above predictions of 1.9%, the report said, adding to the view that the economic recovery is gaining traction.
Federal Reserve Bank of Philadelphia President Charles Plosser dissented, indicating that it likely will be appropriate to maintain the current target range for the federal funds rate for "a considerable time after the asset purchase program ends," because such language is time dependent and does not reflect the considerable economic progress that has been made toward the Committee's goals, the statement read.
The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.26% at 81.52.