The Federal Reserve decided Wednesday to hold its target for overnight interest rates to zero to 0.25 percent and pledged to keep it there for an "extended period" in a bid to ensure a nascent economic recovery gains traction.

The central bank unanimously made the decision, as expected earlier by market players, at the close of a two-day session of the Federal Open Market Committee, keeping intact its bold policy of low interest rates along with a host of programs to stimulate credit flows.

The Fed's decision came despite its assessment that the economy "has continued to pick up" as the housing market, whose collapse has been a drag on growth, has recovered.

According to government data released last week, the U.S. economy grew an annualized real 3.5 percent in the third quarter of 2009, a sharp recovery from the previous quarter's decline of 0.7 percent and marking the first expansion in five quarters.

The July-September growth in terms of inflation-adjusted real gross domestic product -- the total output of goods and services within a nation's borders -- delivered the strongest signal yet that the worst recession in generations has ended.

But the Fed voiced concern that the recovery is likely to be slow.

"Businesses are still cutting back on fixed investment and staffing, though at a slower pace," it said in a statement. "Household spending appears to be expanding, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth and tight credit."

Under these circumstances, the Fed will continue to mobilize a wide range of tools to promote economic recovery and to preserve price stability, it said.

The Fed also said it will purchase about $175 billion of debt issued by government-backed mortgage finance agencies, compared with the $200 billion maximum it had originally allocated, citing limited availability.

"The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion is consistent with the recent path of purchases and reflects the limited availability of agency debt," it said.

On prices, the central bank said it expects inflation will remain subdued for some time as substantial resource slack is likely to continue to dampen cost pressures and longer-term inflation expectations are stable.

The Fed also kept the more symbolic discount rate unchanged at 0.50 percent.

The next FOMC meeting is scheduled for Dec. 15-16.