U.S. Fed won't buy more bonds, for now

The U.S. Federal Reserve says the world's largest economy is growing moderately, but recovery could still be derailed by escalating debt loads in Europe and a still-wobbly U.S. housing market.

"The basic [premise] that growth seems likely to pick up over time is still in our projections," Federal Reserve chair Ben Bernanke said at anews conference following the statement on Wednesday. "But risks remain."

The agency in charge of setting America's interest rate policy opted to hold steady and keep its benchmark rate at effectively zero a widely expected move but Bernanke left open the door for intervention if unemployment stays high,though not at the cost of higher inflation.

"Conditions are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014," the Fed statement read.

The Fed has kept the federal funds rate at between 0 and 0.25 per cent since December 2008, as part of the Fed's aggressive efforts to combat a deep recession and, since June 2009, a sluggish recovery.

Bernankesaid "a little premature to declare victory" in the Fed's drive to stimulate the economy and lower unemployment. Hehas frequently pointed to the chronically weak housing market and the more thanfive million Americans who have been unemployed for more than six months.

At the same time, Bernanke sought to show that he is mindful of the risks of high inflation. He said the Fed would shape its policy to keep inflation no higher than its target oftwo per cent over the long term.

No QE3 news

The Fed statement noted that the job market has improved slightly whilethe housing market has improved somewhat but remains "depressed".

The one policy outlookobservers were keen to hear about was whether the central bank would engage in further bond buying a measure that's part ofpolicy known as quantitative easing after a current program ends in June. The bond purchases are designed to bring down long-term interest rates, which is seen as a way to make credit more available to households for home purchases and the like.

The Fed announced no new plans for additional acquisitions, but Bernanke did say further bond purchases by the Fed remain "very much on the table" if the economy needs more support.

Since the financial crisis struck in 2008, the Fed has pursued two rounds of purchases of Treasury bonds and mortgage-backed securities.