The Federal Reserve continued to reduce its monthly bond-buying program and held interest rates near zero even as it debated persistent conflicting signals in the economy.
In addition to continuing the scaleback of its monthly money-printing efforts, the Fed slashed its outlook for full-year economic growth, cutting gross domestic product from a 2.8 percent to 3 percent range expressed in March down to 2.1 percent to 2.3 percent. The change comes on the heels of a 1 percent drop in first-quarter GDP.
It also modestly lowered its unemployment rate expectations, from 6.1 percent to 6.3 percent—its current level—down to 6.0 to 6.1 percent.
Inflation projections remained relatively stable, from 1.5 percent to 1.6 percent, adjusting it just a notich to 1.5 percent to 1.7 percent.
"Giving short shrift today to higher (not high) inflation I don't believe helps their credibility," Peter Boockvar, chief market analyst at The Lindsey Group, said in a note.
Central bank officials on the Open Market Committee kept their accommodative stance even as they voted to cut quantitative easing from $45 billion to $35 billion a month. The committee said the economy "had rebounded" in recent months, with the labor market showing "further improvement" though unemployment "remains elevated," consistent with language it has used for most of its recent reports.
Economists expected the Fed to keep short-term interest rates near zero while reducing its bond-buying program to $35 billion a month.
Though there has been plenty of market chatter recently regarding inflation, particularly as reflected in consumer prices at the grocery store and gas pump, there was little talk of it in the Fed statement aside from the routine mentions also consistent with recent reports.
"They're willing to let a more inflation run if it's going to help bring down the unemployment rate," said John Canally, chief market strategist at LPL Financial. "This statement confirmed that."
The Fed said inflation "continues to run below" the FOMC's 2 percent target rate, a key consideration for when the central bank will consider raising rates.
"The Fed is very concerned not just with unemployment and not just with inflation, but with financial conditions," Bill Gross, founder of bond manager Pimco, told CNBC. "They don't want to see a runaway here. They want to see a mild, gradual increase. The financial conditions and that real interest rate are quite critical."
The Fed news had only muted impact on markets, with stocks a bit positive on the session.
"This statement is not going to change the market's view of the Fed," Canally said. "From a longer term, historical view things, this is not a game-changer by any means."
This meeting also saw Fed members release their future economic projections.
Despite concerns in March—the last time it released economic forecasts—over the so-called dot plot of future rate expectations, changes were muted.
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