The Federal Reserve Bank’s money policy committee on Wednesday finished a two-day meeting by issuing a statement noting that economic activity has “picked up” from the severe downturn and announcing that it has kept the central bank’s key interest rate steady as expected.

The FOMC noted that conditions in financial markets have “improved further” while housing sector activity rose.

The committee said longer term inflation expectations were stable and that it expects inflation will remain subdued for some time.

The FOMC said the federal funds rates will remain between 0 to ¼ percent, adding that it expects a low levels for the rate “for an extended period.”

It also noted that it expects to conclude its purchases of $1.25 trillion of agency mortgage backed securities and $200 billion of agency debt by gradually slowing the purchases in the first quarter of 2010. During its last meeting in August the Fed had expected to complete the purchases by the end of the year.

The $300 billion of Treasury purchases are expected to end by October 2009, as previously announced.