The U.S. Federal Reserve said on Wednesday that it will continue its 85-billion-dollar monthly bond purchase program to spur economic growth.

In a statement following its two-day policy meeting, the Fed described the economic expansion as "moderate" while for the first time said the downside risks to the outlook for U.S. economy and the labor market have "diminished since the fall."

The Fed officials cited continued improvement in the labor market and further strengthening of the housing sector. They reiterated that the unemployment rate is still too high and repeated their intention to keep buying bonds "until the outlook for the labor market has improved substantially."

The central bank also pledged to keep the short-term interest rates at near zero range as long as the unemployment rate remains above 6.5 percent and inflation is projected to stay below 2.5 percent.

Inflation has been running below the Fed's longer-run objective and long-term inflation expectations have remained stable, according to the statement.

Since the onset of the financial crisis, the Fed has completed two rounds of quantitative easing programs, dubbed as QEs. It announced another round of quantitative easing last September with open-ended purchases of 40 billion dollars mortgage-backed securities per month. It expanded the bond-buying program with additional monthly buying of 45 billion dollars treasury bonds in December 2012. The Fed's balance sheet has ballooned to about 3.4 trillion dollars so far.

Mirroring the words in its last statement made in May, the Fed noted it "is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes."

In its updated economic outlook which is also released at the close of the meeting, the Fed appeared to be slightly more optimistic about the economic outlook, especially for the next year.

It expected the U.S. economy to grow at a pace of 2.3 percent to 2.6 percent in 2013, and 3 percent to 3.5 percent in 2014.

The forecast is based on the individual predictions of the 19 officials of Fed's policy-setting panel. It envisioned the unemployment rate in the 7.2 percent to 7.3 percent range in 2013, and 6.5 percent to 6.8 percent range in 2014.

Source: Xinhuanet