The Federal Reserve on Wednesday said the pace of U.S. economic recovery was proceeding more slowly than it had expected though it was primarily because of temporary factors.

COMMENTS:

VIMOMBI NSHOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS

Just as in their April statement, the Federal Open Market Committee downgraded their assessment of the recovery (from March's 'firming footing' and the most recent characterization of 'moderate pace') to that of a recovery continuing 'somewhat more slowly than the Committee had expected,' yet kept the reassurance that they believed the setbacks to be temporary. The labor market also drew concern from the Fed as they described these indicators as coming in 'weaker than anticipated.' This tone indicates continued accommodative policy that the Fed is in no rush to reverse in the foreseeable future (i.e. the bloated balance sheet will not be trimming any fat this summer).

DAN RIPP, PRESIDENT OF BRADLEY WOODS & CO LTD IN NEW YORK

Not a surprise, but this is sort of a Catch-22 for the Fed, which is a little compromised politically. It is very difficult to increase rates because of the perceived impact on the economy and the cost of financing, which would be bad for the deficit. On the other hand, in the long run, it hurts the dollar to keep rates where they are. I don't want the market to crash, but a strong dollar is more important than short-term slow growth, which we've had for a long time.

Federal reserve