The Federal Reserve's Open Market Committee, ending its two-day August meeting, on Wednesday said it believed "economic activity is leveling out" but that it would keep the target for its federal funds rate at 0% to 0.25% and likely will keep it at "exceptionally low levels" for "an extended period."

In its statement, the FOMC said, "Conditions in financial markets have improved further in recent weeks. Household spending has continued to show signs of stabilizing but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing but are making progress in bringing inventory stocks into better alignment with sales."

Taken together, that means that "although economic activity is likely to remain weak for a time," the FOMC believes its actions and market forces "will contribute to a gradual resumption of sustainable economic growth in a context of price stability."

The FOMC said the Fed will continue its purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year in an effort to support the mortgage-lending and housing markets. It also intends to buy $300 billion in Treasurys, but it will extend the timeline for those purchases through the end of October.

The committee also said it expects inflation to "remain subdued for some time" in spite of recent increases in energy and other commodities, which it expects to diminish under pressure from what it called "substantial resource slack."

Stock markets held onto gains made earlier in the day shortly after the Fed statement was released around 2:15 p.m.