Shares in New York surged on the news that the central bank would not be increasing the base rate in order to check inflation - with the Dow Jones industrial average rising by 2.5 per cent.
Many analysts had speculated that a rate rise could be on the cards, following the release of consumer price data that pegged the annual inflation rate at an above-target five per cent.
In a statement, the Fed's Open Market Committee said: "Inflation has been highâ¦although downside risks to growth remain, the upside risks to inflation are also of significant concern."
It added: "Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth."
The suggestion that the risks of a severe economic slowdown had "diminished somewhat" which was contained in last month's statement - a remark which led to speculation that rates would soon be tightened by the Fed in response - was also dropped.