The Federal Reserve on Tuesday acknowledged recent signs of strength in the economy and said recent financial market strains have eased, offering few clues on the chances for further monetary easing.
The central bank described the economy as expanding moderately, unchanged from its January statement, and said growth still faced significant downside risks.
Policymakers said the job market had improved but unemployment remains high, reiterating its expectation that rates would remain near zero until at least late 2014.
A quickening in the pace of jobs growth and a sharp drop in the unemployment rate to 8.3 percent from 9.1 percent in August has led some economists to rein in their expectations for a further easing of monetary policy.
The Fed said a recent spike in energy costs would likely push up inflation but only in the short run. Richmond Fed President Jeffrey Lacker again dissented against the decision, since he did not expect economic conditions to warrant ultra-low rates until late 2014.
A report on Tuesday showed retail sales posted their largest gain in five months in February, the latest data to suggest the economic recovery is on a more solid footing.
Even so, Fed officials are uncertain whether the progress reducing unemployment can be maintained given still-sluggish economic growth, and many analysts believe the central bank will launch another round of bond buying later in the year.
In a poll on Friday of firms that trade directly with the Fed, 14 of 18 economists anticipated further quantitative easing. That survey was taken after the government said the economy created more than 200,000 jobs for the third month running in February.
The Fed cut overnight interest rates to near zero in December 2008 and has bought $2.3 trillion in bonds to boost growth. It repeated on Tuesday that it was likely to hold rates at rock bottom levels at least through late 2014 and that it would continue to rebalance its portfolio to pull down longer-term interest rates, a program that ends in June.
Analysts are looking to the Fed's two-day meetings in April and June for decisions about any new directions for policy. At both meeting, Bernanke will hold a news conference and officials will make public updated economic and interest rate projections.
Most economists think the economy will expand at about a 2 percent annual rate in the first quarter. Fed Chairman Ben Bernanke said in January it would normally take a growth pace of between 2 percent and 2.5 percent just to hold the jobless rate steady.
While the economic recovery is nearly three years old, officials lament that the United States is still far from full employment. Although the jobless rate has fallen significantly over the last six months, it remains stubbornly high.
The Fed has downplayed any worries about inflation in recent months, saying it expects sluggish growth to hold price pressures in check. Officials said they expect inflation to run at or below the central bank's 2 percent target in coming quarters.
However, oil prices have been climbing in reaction to tensions over Iran's nuclear program. U.S. gasoline prices jumped in January, and even core consumer prices, which strip out volatile food and energy costs, rose by 2.3 percent over 12 months, the fastest pace in more than two years.
Rising concerns about inflation would weaken any argument at the Fed in favor of easing financial conditions further.
(Editing by Andrea Ricci)