An accompanying statement was more upbeat on both growth and inflation, though officials reiterated that "some inflation risks remain," further highlighting that a reduction in interest rates -- once considered likely by financial markets -- isn't at all on the Fed's radar screen. (Read the full text of the Fed's statement.)

The FOMC voted unanimously to keep the Fed funds rate at 5.25%. The decision was universally expected by Wall Street.

It was the first unanimous decision to hold rates steady since the current pause began in August. Richmond Fed President Jeffrey Lacker, who dissented in favor of higher rates at each of the past four meetings, isn't a voting FOMC member this year. Regional bank presidents, with the exception of New York, vote on a rotating basis.

"Recent indicators have suggested somewhat firmer economic growth," the FOMC said, citing "some tentative" evidence of stabilization in housing.

That's a more upbeat assessment than at the Fed's last meeting on Dec. 12, when officials said growth had "slowed" due to a "substantial cooling" in housing, and that despite "mixed" indicators, the economy should expand at a "moderate" pace.

The economy did appear sluggish then, but since the December jobs report, consumption and durable goods have been uniformly strong.

As a result, after posting two straight subpar quarters gross domestic product increased 3.5% during the final three months of the year, the government said Wednesday.

That's above what economists consider the economy's potential, suggesting more strain on already tight labor and product markets. (Read the GDP report and economists' reactions.)

Indeed, the Fed repeated Wednesday that high levels of resource use could sustain inflation pressures.

Yet just as downside growth risks have eased, so too have the economy's upside inflation risks. So despite the tightening bias and acknowledgement of faster economic growth by the Fed, the likeliest scenario remains a lengthy period of policy stability.

The personal consumption expenditures price index excluding food and energy, the Fed's preferred gauge, has softened of late with the annual rate running at 2.2% through November, which is close to the upper end of the Fed's 1% to 2% comfort zone.

And a tame 0.8% rise in fourth quarter employment costs suggests the tight jobs market isn't feeding yet into wage inflation.

"Readings on core inflation have improved modestly in recent months," the Fed said, and inflation should moderate going forward.

The Fed deleted past references to factors like past rate increases and contained inflation expectations that should limit price growth.

The Fed repeated that "the extent and timing of any additional firming that may be needed" will depend on the inflation and growth outlook

Fed Chairman Ben Bernanke will have an opportunity to elaborate on the economic and interest rate outlook next month when he presents the Fed's semiannual monetary policy report to Congress.

_{(Fuente: Cortesía SEI Compas)}