- Janet Yellen, Fed chairwoman
The world's largest economy was expected to bungee jump in the second quarter, recovering from a 2.9% slump in first three months of 2014. The U.S. economy expanded at an annualized rate of 4.0% between April and June, beating the consensus forecast of a 3.0% growth, while first quarter's growth has been revised to –2.1%, instead of –2.9% expected earlier. Another positive aspect was a 2.3% surge in personal consumption expenditures, meaning consumers are willing to spend despite economic uncertainty.
Also Wednesday, in a widely anticipated move, the FOMC decided to reduce the central bank's bond-buying programme by another $10 billion to $25 billion per month starting August. Currently purchases will be split between long-term treasuries and mortgage-backed securities by $15 and $10 billion respectively. During the last meeting the FOMC expressed its concerns about the stability of the labour market, this time, the Chair has turned beat on the domestic labour market, as the economy is moving towards its full-employment goal. It means that the Fed sees a range of indicators including the participation rate improving. It is another signal that the committee is wary of raising borrowing costs too early, however, with forecasts the unemployment rate falls below 6% this year, higher inflation and stronger growth, the FOMC can change its view and consider a sooner-than-expected rate hike.
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