Fed to keep trimming bond purchases as economy shows signs of picking up after first quarter stall

The Federal Reserve decided to keep reducing the pace of bond purchases at its monetary policy meeting on Wednesday.

Its monthly asset buying is to be reduced to $45 billion, its fourth straight $10 billion cut, and further reductions are likely in “measured steps”.

The decision came despite data on Wednesday showing that the US economy grew at a mere 0.1 percent annual rate in the first quarter mainly as a result of bad weather.

However, other reports on Wednesday showed that the economy is likely to have picked up pace at the beginning of the second quarter. The Institute for Supply Management-Chicago’s business barometer rose to 63.0 in April from 55.9 in March. ADP reported that private employment increased by 220,000 in April, up from 209,000 in March.

While the Federal Reserve continues to trim its bond purchases, the European Central Bank is also looking less likely to ease monetary policy further. A report on Wednesday showed that the inflation rate in the euro area rose to 0.7 percent in April from 0.5 percent in March.

The Bank of Japan, though, may still need to ease monetary policy further. The BoJ on Wednesday lowered its growth projection for the Japanese economy for the fiscal year to next March to 1.1 percent from 1.4 percent while keeping its 1.3 percent inflation rate forecast.

In addition, Japanese factory output rose just 0.3 percent in March after having fallen 2.3 percent in February and the Markit/JMMA manufacturing PMI fell to 49.4 in April from 53.9 in March.