The Fed has signaled it's likely to raise interest rates as soon as March, but is holding rates near zero for now.
It also reaffirmed March would be the month when it ends its bond purchases.
"Today in support of these goals, the Federal Open Market Committee kept its policy interest rate near zero and stated its expectation that an increase in this rate would soon be appropriate. The committee also agreed to continue reducing its net asset purchases on the schedule we announced in December, bringing them to an end in early March."
Speaking at a press conference Wednesday following the Fed's two-day policy meeting, Fed Chair Jerome Powell explained the decision comes as inflation is well above 2 percent, and the country is exhibiting a strong labor market.
This means the upcoming rate hike will come almost two years after the Fed slashed rates to zero in response to the economic fallout caused by the pandemic.
Powell also stressed the Fed will monitor inflation going forward.
"We're committed to our price stability goal. We will use our tools both to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched. And we'll be watching carefully to see whether the economy is evolving in line with expectations."
The Federal Reserve also warned that the American economy continues to be largely dependent on the course of the pandemic, saying it has caused a severe imbalance between supply and demand.
Kim Hyo-sun, Arirang News.