After a one-day policy meeting, the Fed said unemployment should continue to decline gradually as the economy expands. It also noted that consumer spending and business investment have picked up.
And it took a more hopeful view of Europe's debt crisis. Though the crisis still threatens the global economy, the danger has eased, the Fed said.
The Fed's policymaking committee "is clearly shifting its stance away from blanket gloom to something more realistic," said Ian Shepherdson, an economist at High Frequency Economics.
The policymakers did caution that rising oil and gas prices will raise inflation temporarily. But they said longer-term inflation should remain stable — repeating a view expressed by Chairman Ben Bernanke earlier this month.
The statement was approved on a 9-1 vote. Atlanta Fed President Jeffrey M. Lacker dissented for the second straight meeting. The statement said Lacker doesn't "anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate through late 2014."