The Federal Reserve on Wednesday left its benchmark interest rate, the fed funds target rate, unchanged at 0.00%-0.25% and trimmed $10 billion from its $55 billion monthly asset-purchasing program in place to spur recovery.
The Fed is now purchasing $45 billion in Treasury holdings and mortgage debt a month to help make broader financial conditions more accommodative to strengthen recovery.
While the unemployment rate remains elevated, the labor market is improving, while fiscal factors that have weighed on recovery in the past are diminishing as well, the Federal Open Market Committee, the Fed's rate-setting body, said in a statement.
Earlier Wednesday, the Bureau of Economic Analysis reported that U.S. gross domestic product grew at an annual rate of 0.1% in the first quarter, far shy of expectations for a 1.2% growth rate.
Still, from a longer-term point of view, the economy continues to gain steam as it brushes off the fallout that rough winter weather inflicted on commerce earlier this year, according to the Fed.
"Information received since the Federal Open Market Committee met in March indicates that growth in economic activity has picked up recently, after having slowed sharply during the winter in part because of adverse weather conditions. Labor market indicators were mixed but on balance showed further improvement," the Fed said in its statement.
While the unemployment rate still remains elevated, the broader economy continues to improve albeit at an uneven pace.
"Household spending appears to be rising more quickly. Business fixed investment edged down, while the recovery in the housing sector remained slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable.
With the economy strengthening, the Fed decided to make a fresh cut to its monthly bond-buying program, which began in late 2012 at $85 billion a month.
"The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions since the inception of the current asset purchase program, the Committee decided to make a further measured reduction in the pace of its asset purchases."
Fed asset purchases aim to spur recovery by suppressing long-term borrowing costs.
Still, once the Fed does conclude the stimulus program, benchmark interest rates should remain at rock-bottom levels for a while.
"The Committee continues to anticipate, based on its assessment of these factors, 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, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored," the Fed statement read.
"The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."