The U.S. Federal Reserve held its ground on its bond-buying program, declaring it will keep up its $85 billion US per month in bond purchases because the economy needs more support.​

It also says it plans to hold its key short-term rate at a record low near zero at least as long as the unemployment rate stays above 6.5 percent and the inflation outlook remains mild.

A 16-day partial shutdown last month weighed on the U.S. economy, with a survey by ADP suggesting private sector employers hired just 130,000 new workers in October. Consumer confidence also dropped last month, according to the U.S. Conference Board.

Many have been calling for the central bank to scale back, or 'taper' its quantitative easing program, which began in September 2012.

The Fed did signal that it thinks the economy is improving despite some recent weak data and uncertainties caused by the partial government shutdown. It no longer expresses concern, as it did in September, that higher mortgage rates could hold back hiring and economic growth. 

Some analysts said this suggests that the Fed might be prepared to slow its bond purchases by early next year — sooner than some have assumed.

"The tone was probably more positive on the outlook than most people expected," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics.

But Martin Schwerdtfeger, senior economist with TD Economics, noted that the federal shutdown may mean the Fed is working with incomplete economic data.

"We believe the odds are still in favor of a reduction in monthly asset purchases to start in March 2014," he said in a note issued after the Fed release.

"However, the recent softening in both the housing and labor markets, coupled with the lingering uncertainty stemming from January's pending fiscal deliberations provide more than enough factors to potentially alter the Fed's ongoing assessment of the macroeconomic outlook; and, with it, our own expectations about the future stance of monetary policy."

Congress passed only temporary fixes to reopen the government on Oct. 17. Unless a new budget deal is reached by Jan. 15, another shutdown is possible. Congress must also raise the government's debt ceiling after Feb. 7. If not, a market-rattling default will remain a threat.

Investors seemed to conclude that the Fed might be ready to reduce its stimulus earlier than expected. The Dow Jones industrial average, which had been down 29 points before the Fed issued its statement, fell nearly 53 points about two hours later.

And the yield on the 10-year Treasury note, a benchmark for rates on mortgages and other loans, rose from 2.49 per cent to 2.52 per cent. That suggested that investors think long-term rates may rise because of less bond buying by the Fed.

At its previous meeting in September, the Fed surprised investors and economists when it chose not to reduce its bond buying. Since then, the partial shutdown shaved an estimated $25 billion from economic growth this quarter. And a batch of tepid economic data point to a still-subpar economy.

The Fed has one more policy meeting this year in December.Ben Bernanke, who has held the position of Federal Reserve chair since 2006, will soon be replaced.

Janet Yellen has been nominated by President Barack Obama to be the next chair of the Federal Reserve, and would become the first woman to hold the post if her nomination is approved.

Assuming that Yellen is confirmed by the Senate, her first meeting as chairman will be in March. Many economists think no major policy changes will occur before a new chairman takes over.

With files from the Associated Press