The Federal Reserve on Wednesday left interest rates near zero and renewed a promise to keep them low for an extended period, though it sounded more upbeat on the economic recovery and jobs.

At the conclusion of a two-day meeting that took place against the backdrop of rising financial turmoil in Europe, the U.S. central bank said consumer and business spending were picking up steam.

Economic activity has continued to strengthen and... the labor market is beginning to improve, the central bank said.

The description of the job market was somewhat brighter than in March, when the Fed said only that employment was stabilizing. It repeated that employers remained reluctant to add to payrolls.

It reiterated a closely watched statement that rates were likely to remain exceptionally low for an extended period because of low inflation and high unemployment.

Kansas City Federal Reserve Bank President Thomas Hoenig dissented for a third consecutive meeting, because he opposed the ultra-low rates pledge on the grounds that it could lead to a build-up of future imbalances.

The U.S. economy has been expanding since last summer, emerging more quickly than anticipated from its deepest recession since the Great Depression. Gross domestic product rose at a 5.6 percent annual rate in the fourth quarter, and is forecast to have climbed at a 3.4 percent pace in the first three months of this year.

Employment gains have been harder to come by. With the jobless rate stuck at 9.7 percent, some Fed officials remain anxious about the sustainability of the economic rebound.

The pace of economic recovery is likely to be moderate for a time, the Fed said, repeating a phrase it employed after its last two meetings in January and March.

In response to the recession and worst financial crisis in generations, the Fed slashed interest rates to the bone and undertook a series of emergency measures to help fractured credit markets.

They have had some success in restoring financial stability, but scars from the crisis are still visible.

Instead of the subprime mortgages that saddled homeowners and banks with bad debts, current worries focus on the heavy debt loads of some euro zone nations and the possibility their woes could be the precursor to a broader sovereign debt crisis among advanced nations.

Ratings agency S&P downgraded Spain on Wednesday, a day after cutting Greece and Portugal's debt grades almost in tandem, sending global markets into a tailspin. European stocks have fallen more than 6 percent in less than two weeks.

In recent week, Fed officials have said the debt troubles in Greece and some other euro zone nations were not yet directly affecting the U.S. outlook, though they continue to watch for signs of a renewed liquidity crunch.

The Fed would act when the contagion in European financial markets is beginning to impact U.S. financial markets, said Joseph Brusuelas, chief economist at Brusuelas Analytics in Stamford, Connecticut.

Money markets showed the first signs of stress on Wednesday as fallout from the euro zone government debt crisis spread, with some banks finding access to liquidity becoming more difficult.

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