The Federal Reserve refrained from increasing its $1.75 trillion bond-purchase program, saying the pace of economic contraction is slowing and predicted inflation will remain "subdued for some time."

"Substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time," the Federal Open Market Committee said in a statement after a two-day meeting in Washington where it also kept the benchmark interest rate between zero and 0.25 percent.

The rate will stay at "exceptionally low levels" for an "extended period."

The Fed wants to quell concerns that the $1 trillion expansion in its balance sheet will fuel inflation, pushing bond yields higher and crippling any rebound in the economy.

The Fed's $300 billion Treasuries-purchase plan is scheduled to end in mid-September, according to the FOMC statement at the conclusion of the March 17-18 meeting, when it was announced. The Fed also committed to buy up to $1.45 trillion of housing debt this year. At its current rate, the Fed will reach the $300 billion of Treasuries by late August.

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