Fed policymakers said in a statement the Fed would keep buying $85 billion in bonds a month and modestly raised its expectations for GDP growth for 2014, from 2.9 to 3.4 percent to 3.0 percent to 3.5 percent. But in a press conference, Bernanke said if the economy continues to improve the asset-purchasing program could start winding down towards the end of 2013 and wrap up in 2014.

Interest rate hikes however, he said, are a separate issue and "still far in the future."

"Wall Street traders expected exactly what the Fed delivered today: slight forecast improvements while providing a crutch to continue with its aggressive monetary policy measures," said Todd Schoenberger, managing partner at LandColt Capital. "Interestingly, the language in the statement provides a mulligan on the recent 'tapering' comments. But Wall Street has already 'traded out' those statements and bulls will now focus on the comments about the likelihood of an increase in rates not occurring until 2015. Keeping rates low indicates a continued bull run in equities for the foreseeable future."

Treasury prices fell after the announcement, with the benchmark 10-year yield hitting its highest level since 2011. Gold prices briefly dipped below $1,350 an ounce for the first time in more than four weeks and the SPDR Gold Trust fell to close at its lowest level since February 2011.

Major averages have been volatile since Bernanke said last month that the Fed could begin to pare back its stimulus efforts if the U.S. economy gains momentum.

President Barack Obama added to uncertainty about Fed policy on Tuesday, when he gave a press interview in which he suggested that Bernanke would leave at the end of his term in January. Obama said Bernanke had "already stayed a lot longer than he wanted or he was supposed to."

But Bernanke refused to address questions about his future at the central bank. Fed Vice Chairman Janet Yellen is widely seen as the leading candidate to replace Bernanke, but there are other possibilities, including former Treasury Secretary Larry Summers. Yellen's views are viewed as similar to those of Bernanke.



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