The American central bank has positioned markets for a reduction in its 85 billion dollars-a-month bond purchase program.
The Federal Open Market Committee (FOMC), bank's monetary policy panel, seems to have been weighed down by weakened pace of job-creation in recent months and slow economic growth in the first half of the year, CBS News reports.
Many economists and stock analysts had expected the Fed to announce plans to trim its monthly purchases of Treasury and mortgage bonds, the report added.
As soon as FOMC issued its policy statement, stocks surged with the S and P 500 and Dow Jones industrial average both ending the day at all-time highs.
The Dow climbed 146 points to close at 15,675. The S and P gained 221 points to finish at 1,725. The Nasdaq composite finished at 3,784, up 38 points.
The committee decided to continue purchasing additional agency mortgage-backed securities at a pace of 40 billion dollars per month and longer-term Treasury securities at a pace of 45 billion dollars per month.
The Fed has also trimmed its forecasts for economic growth this year and in 2014.
It now expects GDP this year of 2 percent to 2.3 percent, down from a June projection of 2.3 percent to 2.6 percent.
Growth is predicted to range from 3 percent to 3.5 percent next year, the report added.
A key gauge of the market's response to the Fed's announcement are interest rates on bonds, whose movements indicate investors expectations' for the economy and for monetary policy.
--ANI (Posted on 19-09-2013)