The Fed said that economic activity had "continued to pick up" and that the housing market also had grown stronger, a key ingredient to a sustained recovery.

But Fed Chairman Ben S. Bernanke and his colleagues warned that rising joblessness and hard-to-get-credit for many people and companies could restrain the rebound in the months ahead.

"Household spending appears to be expanding, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing," the Fed said in a statement after it ended its two-day policy meeting.

Against that backdrop, the Fed kept the target range for its bank-lending rate at zero percent to 0.25 percent. And it made no major changes to a program to help drive down mortgage rates.

Commercial banks' prime lending rate, which is used to set rates on home-equity loans, certain credit cards, and other consumer loans, will stay at about 3.25 percent, the lowest in decades.

Still, some credit card rates have risen over the last several months. Part of that reflects rate bump-ups by lenders in response to escalating defaults on credit card loans. Lenders also pushed through increases before a new law clamping down on sudden rate increases for credit card customers takes effect early next year.

The Fed stuck with its pledge to keep rates at "exceptionally low" levels for "an extended period." Many economists predict that means the Fed will leave rates where they are into part of next year to help give the recovery traction.

The central bank hopes that low rates will entice American consumers and businesses to boost spending, which would give the recovery more traction.

The Fed has now entered into a new phase - managing the recovery rather than fighting the worst recession and financial crisis to hit the country since the Great Depression.

At some point when the recovery is more firmly rooted, the Fed is likely to start signaling that higher rates are coming - perhaps by next spring or summer.

In the Fed's Words

From yesterday's Federal Open Market Committee statement on interest rates and the economy:

Economic activity has continued to pick up . . . [but] is likely to remain weak for a time.

The committee expects that inflation will remain subdued for some time.

In these circumstances . . . the committee will maintain the target range for the federal funds rate at zero percent to 0.25 percent.

Economic conditions . . . are likely to warrant exceptionally low levels of the federal funds rate for an extended period.