The Federal Reserve’s Federal Open Market Committee voted to hold interest rates steady at near zero at the conclusion of its two-day meeting on Wednesday, keeping the target rate in a range of 0% to 0.25%.

The central bank also upgraded its outlook for the nation's economy, saying in its policy statement that “economic activity has picked up following a severe downturn," a signal that the Fed now believes the recession has ended. 

This was the first meeting of the FOMC since Fed Chairman Ben Bernanke publicly said on Sept. 15 he believed the recession was now technically over as well.

"The Fed acknowledged the reality that the economy is improving," said Dan Greenhaus, chief economic strategist with the brokerage house Miller Tabak. 

The FOMC said it believes interest rates will likely need to remain “exceptionally” low for “some time” as the economy begins to mend and "ongoing job losses, sluggish income growth, lower housing wealth and tight credit" will continue to place pressure on nation's economy for the coming months. The statement suggests that the nation should not expect the Fed to raise interest until some time in 2010.

The committee also believes that long-term inflation expectations will remain subdued for some time. The Fed did not acknowledge commodity and energy prices in their inflation outlook, as they had done in the August policy statement.

Interest rates have remained near zero for nearly 10 months now, as the Fed has attempted to keep cheap financing available for the struggling financial sector. Because the Fed’s traditional monetary policy tools through interest-rate policy have been essentially exhausted, the Fed has created emergency programs and purchased securities directly from the open market to help keep interest rates low.

In its statement, the FOMC clearly said the Fed will continue to use all tools available to the central bank to stir economic growth. The Fed will continue to purchase of $1.25 trillion in agency mortgage-backed securities and $200 billion in agency debt, and will finish its outright purchase of $300 billion in Treasury securities by Oct. 2009. 

However as the economy remains exceptionally weak in real terms, John Lonski at Moody's Economy.com said that its entirely possible that the Fed may be positioning itself to reinstate these programs if the economy slips back into recession.

"The economy is getting back on its feet, but still needs assistance from fiscal and monetary policy," Lonski said. Lonski added that recent political pressures on Washington on the issue of government spending may make it politically impossible for Congress or the White House to call for more fiscal stimulus, leaving any aid needed by the economy in the hands of the Fed. 

"If they wait for Washington to help with this recovery, it might be too late," he said. 

The vote by the ten-member FOMC was unanimous.