The U.S. Federal Reserve trimmed its asset purchases by another $10 billion in July to a total of $35 billion and confirmed that it was likely to continue to reduce the pace of purchases - commonly known as quantitative easing - in coming months if the labour market continues to improve and inflation moves back to its long-run objective.
The Fed's policy-making body, the Federal Open Market Committee (FOMC), also repeated its policy guidance that "a highly accommodative stance of monetary policy remains appropriate" to boost employment and price stability and it continues to anticipate that it will "maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends."
The Fed has held its benchmark federal funds rate at zero to 0.25 percent since December 2008 and embarked on asset purchases to hold down long-term rates in March 2009. But with economic growth improving and unemployment declining, the Fed in January started to reduce its current asset purchase program by $10 billion a month.
But the Fed wants to be sure that any increase in the fed funds rate does not deal a serious setback to the economic recovery and repeated that even after employment and inflation are near levels that allow it to fulfill its mandate, "economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."
The U.S. economy was hit hard in the first quarter by unusually cold weather, with Gross Domestic Product shrinking by 1.0 percent from the fourth quarter of 2013. On a year-on-year basis, GDP grew by 2.0 percent, down from annual growth of 2.6 percent.
But the FOMC said the U.S. economy had rebounded in recent months, with household spending "rising moderately," fixed investment by business resuming its advance and labour market indicators showing further improvement.
Reflecting the first quarter slowdown, the Fed revised downward sharply its forecast for economic growth this year to a range of 2.1 to 2.3 percent from its March forecast of 2.8-3.0 percent.
But in its latest forecast, the forecast for growth in 2015 was unchanged at 3.0 to 3.2 percent and the 2016 forecast steady at 2.5 to 3.0 percent.
The U.S. jobless rate was stable at 6.3 percent in May from April and the FOMC said it expect labour market conditions to improve further with appropriate policy accommodation.
The Fed revised downward its forecast for unemployment this year with the rate seen declining to 6.0 to 6.1 percent from its March forecast of 6.1 to 6.3 percent, and the 2015 forecast to a rate of 5.4-5.7 percent from 5.6-5.9 percent. The forecast for 2016 was revised down to 5.51 to 5.5 percent from 5.2-5.6 percent.
Consumer prices in the U.S. have also been moving up recently, with the headline inflation rate up by 2.1 percent in May from 2.0 percent in April.
But the Fed's preferred inflation gauge, the personal consumption expenditure price index, was only up 1.6 percent in April. The Fed targets 2.0 percent inflation in the PCE index.
The Fed's forecast for PCE inflation this year was largely unchanged at 1.5-1.6 percent from March's 1.4-1.6 percent, the 2015 forecast was unchanged at 1.5-2.0 percent and the 2016 forecast largely steady at 1.6-2.0 percent from 1.7-2.0 percent.
In its economic projection, the Fed policy makers also provide an estimate of when they expect to raise the fed funds rate, with only one FOMC member looking for the fed funds rate to rise to 1.0 percent by the end of this year, the same as in March.
Twelve FOMC members judge that the first increase in the fed funds rate would occur in 2015, down from 13 members in the March projection, while 3 FOMC members first expect rates to rise in 2016, up from 2 in March, indicating a slight postponement in a tightening of the policy stance.