The US Federal Reserve said on Wednesday that the US economic activity has continued to "pick up," and it decided to keep a key interest rate unchanged at a record low of between zero to 0.25 percent to prop up the economy.

Information received recently suggested that "economic activity has continued to pick up and that the deterioration in the labor market is abating," the Fed said.

The housing sector has shown "some signs of improvement" over recent months, said the US central bank in a statement following its two-day policy-making meeting in Washington.

Meanwhile, household spending appears to be expanding at a moderate rate, though it remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit.

Businesses are still cutting back on fixed investment, though at a slower pace, and remain reluctant to add to payrolls; they continue to make progress in bringing inventory stocks into better alignment with sales, according to the Federal Reserve.

Moreover, "financial market conditions have become more supportive of economic growth," said the statement, but noting that "economic activity is likely to remain weak for a time."

The Fed said it continues to "anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability."

Although the economy is stabilizing, the Fed believes that the economy will keep a lid on inflation.

"With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable," the Fed "expects that inflation will remain subdued for some time."

Against this backdrop, the Fed decided to hold the key interest rate, or federal funds rate, which commercial banks charge each other for overnight loans, unchanged at a record low of between zero to 0.25 percent.

The decision means that commercial banks' prime lending rate, used to peg rates on home equity loans, certain credit cards and other consumer loans, will stay around 3.25 percent, the lowest rate in decades.

Moreover, the Fed said that the interest rate is likely to remain at the current low level for "an extended period".

The Fed also decided to stay the course on existing programs intended "to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets."

(Xinhua News Agency December 17, 2009)