The U.S. Federal Reserve has continued to taper its buying of U.S. bonds, reducing the amount it will buy to $35 billion US a month, down by $10 billion.

Fed chair Janet Yellen spoke at a news conference this afternoon, after meeting with the Fed’s open market committee, pointing to considerable uncertainty over the U.S. economy.

“The economy is continuing to make progress toward our target of maximum employment and price stability,” Yellen said.

The Fed has downgraded its GDP growth expectations for the U.S. economy from the 2.8 to 3 per cent predicted in March to 2.1 to 2.3 per cent in June.

The potential growth rate of the economy could be lower for some time, Yellen said, adding that she is not fully confident that the growth rate will stay on track.

But she said that all indicators do point to things getting better, including improved investment, improved labour market participation and increasing .

The Fed says growth in economic activity has rebounded in recent months after a grim first quarter and labour market indicators showed further improvement, estimated to hit 6 to 6.1 per cent this year.

But it warned there is considerable slack in the labour market, household spending is merely moderate and the recovery in housing remains slow.

Its guidance on interest rates was largely unchanged.

“In determining how long to maintain the current 0 to 0.25 percent target range for the federal funds rate, the committee will assess progress--both realized and expected--toward its objectives of maximum employment and twp per cent inflation,” the committee said in its statement.

“This assessment will take into account a wide range of information, including measures of labour market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments.”

Interest rates are not expected to move upwards until mid-2015, the same timing the Fed predicted in its last outlook.

While Bank of England governor Mark Carney has indicated he may move to raise rates more quickly because of rising inflation, the Fed is still pointing to the risk of low inflation in the U.S.  U.S. inflation is predicted at 1.5 percent to 1.7 per cent by yearend.

Yellen was asked about this week's high consumer price index reading 2.1 per cent, above the Fed's target rate of two per cent.

She dismissed the higher readings as moved temporarily by high energy and airline prices.

"Recent readings CPI index have been on the high side, but the data we are seeing is noisy. Broadly speaking inflation is evolving along with the committee’s expectations," she said.

Yellen said the Fed would tell the public if it sees a chance that it might have to move faster on rates, but it makes its decisions based on a wide range of economic indicators, not just the two key ones of employment and inflation.

“If the economy strengthens, then rates could go up sooner and faster than anticipated,” Yellen said, but pointed out that there was an equal chance that the Fed might have to slow down its course.