US Fed sees recovery as interest rates kept at 0 percent

The central bank in a statement said US economic activity was "levelling out" and the financial sector had "continued to improve" in the last few weeks. Household spending, which accounts for about two-thirds of economic output, was also "stabilizing."

The Fed has kept its benchmark federal funds rate at a 0-0.25 percent range since December and repeated that it would stay the course "for an extended period" as the economy begins to recover.

"The committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets," the 10-member Federal Open Market Committee said at the end of a two-day meeting.

US stocks surged more than 1 percent earlier Wednesday and continued rising after the Fed statement was released.

The Fed's forecast is in line with the more optimistic note sounded by many economists in recent weeks. In a survey by the Wall Street Journal Wednesday, 27 out of 47 economists said the recession which began in December 2007 has ended.

The world's largest economy shrank by only 1 percent in the second quarter of 2009, according to government figures from late July, after a massive 6.4-percent contraction in the first three months of the year.

Unemployment also edged lower in July, dropping to 9.4 percent from 9.5 percent the previous month.