The U.S. Federal Reserve on Wednesday announced that it will keep the current ultra-loose monetary policy to sustain economic recovery.

The U.S. economy has been expanding "moderately," and labor market conditions have improved in recent months. The unemployment rate has declined but remains elevated, said the central bank in a statement after its two-day Federal Open Market Committee (FOMC) meeting that concluded on Wednesday.

Household spending and business fixed investment have continued to advance. Despite some signs of improvement, the housing sector remains depressed, noted participants of the FOMC meeting, the powerful interest-rate setting panel.

The Fed reaffirmed its policy decision to keep the exceptionally low levels of federal funds rate, currently in the range of 0-0.25 percent, at least through late 2014 to support economic recovery.

Inflation has picked up somewhat, mainly reflecting higher prices of crude oil and gasoline. However, longer-term inflation expectations have remained stable. "The increase in oil and gasoline prices earlier this year is expected to affect inflation only temporarily," said the Fed.

The central bank also forecast that the U.S. economic growth will remain moderate over the coming quarters and then pick up gradually, while the unemployment rate will decline gradually.

"Strains in global financial markets continue to pose significant downside risks to the economic outlook," said the Fed.

Federal Reserve Chairman Ben Bernanke is scheduled to hold a press conference later on Wednesday.