In an updated forecast Wednesday, the Fed predicts the economy will grow between 2.4 percent and 2.9 percent in 2012. That compares with its forecast in January, when it estimated growth this year between 2.2 percent and 2.7 percent.

The Fed is estimating that unemployment, now at a three-year low of 8.2 percent, will be between 7.8 percent and 8 percent at year's end.

Its prediction for inflation is slightly higher but remains below its 2 percent target. And 11 Fed officials expect the first interest rate hike will not occur until 2014 or later, the same number who said so in January.

But the statement was a bit more hawkish in sentiment, with seven Open Market Committee members seeing a rate hike in 2014.

The forecast is critical in that it is indicative of whether the Fed will take on a third round of quantitative easing measures to boost the economy. An improving economy would suggest that QE3 is not imminent, though Chairman Ben Bernanke reiterated that the central bank is keeping its options open.