The U.S. economy expanded less than forecast in the fourth quarter as consumers curbed spending and government agencies cut back, validating the Federal Reserve's decision to keep interest rates low for a longer period.

Gross domestic product, the value of all goods and services produced, climbed at a 2.8 percent annual following a 1.8 percent gain in the prior quarter, Commerce Department figures showed today in Washington. The median forecast of 79 economists surveyed by Bloomberg News called for a 3 percent increase. Excluding a jump in inventories, growth was 0.8 percent.

Fed officials this week said they were concerned about the economy's lack of vigor two years after the last recession ended, prompting a pledge to keep interest rates low into 2014. The improvement in the job market has yet to translate into gains in wages large enough to propel bigger gains in household spending, which accounts for about 70 percent of the economy.