Fed downgrades US economic growth to modest

The Federal Reserve said on Wednesday that the US economy is growing only modestly , a downgrade from its June assessment.

The Fed expects growth will pick up in the second half of the year, but the more cautious message may be a signal that it's not ready to slow its bond purchases soon.

In a statement after a two-day policy meeting, the Fed says it will keep buying $85 billion a month in bonds to help lower long-term interest rates.

And it says it plans to hold its key short-term rate at a record low near zero at least as long as the unemployment rate stays above 6.5 per cent and the inflation outlook remains mild.

Stronger job growth has fueled speculation that the Fed could start reducing its purchases as soon as September. But economic growth remains sluggish and unemployment high at 7.6 per cent.

At its June meeting, the Fed described economic growth as "moderate," and forecast that growth could be at least 2.3 per cent for the year.