Fed Sees Moderate Economic Growth, Leaves Rates Unchanged (Update 1)

NEW YORK (TheStreet) - The Federal Reserve left interest rates unchanged as it said the labor market is showing signs of improvement and suggested that the economy is returning to moderate economic growth.

The Federal Open Market Committee -- the Fed's policy making wing -- downwardly revised its 2013 real GDP forecast to 2.3% to 2.8% growth from 2.3% to 3% in December, and cut its unemployment rate prediction to 7.3% to 7.5% from 7.4% to 7.7% in December.

"I think there's probably a little bit less angst and panic that we're hearing ... and there's certainly some continued recognition of the challenges that they the Fed face," said Erik Davidson, deputy chief investment officer at Wells Fargo Private Bank. "I think they're recognizing the improving labor market, they're recognizing the economy's not doing poorly."

TheStreet also broke down the Fed's announcement with FAO Chief Economist Robert Brusca.

Below is the text to the FOMC's announcement. Click through here for the Fed's latest economic projection.

Information received since the Federal Open Market Committee met in January suggests a return to moderate economic growth following a pause late last year. Labor market conditions have shown signs of improvement in recent months but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy has become somewhat more restrictive. Inflation has been running somewhat below the Committee's longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee continues to see downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.