Reiterates Fed will lower rates for a while

WASHINGTON (Reuters) - The Federal Reserve Tuesday left interest rates steady at near zero and reiterated that remain at exceptionally low levels for a prolonged period, even though he was more optimistic about the state of the labor market.

On a more positive tone on employment suggests that the Fed may be closer to eliminating its promise to keep rates low, which might lead to monetary tightening in coming months.

At the same time, also was upbeat about business investment.

Still, he reiterated his view that economic recovery would be tempered by time and inflation to remain off, allowing him to leave the stable rate in the range of zero to 0.25 percent.

"(...) The Committee continues to anticipate that economic conditions, including low utilization rate of resources, trends and inflation expectations contained inflation stable, probably ensure exceptionally low levels in the federal funds rate for an extended period," said the Fed in a statement.

Stocks deepened their gains after the announcement, while the dollar fell against the euro and the prices of Treasuries rose.

"Unlike the financial system, the economy as a whole has not yet healed, so it still requires an extremely accommodative monetary policy," said Zach Pandl, economist at Nomura Securities International in New York.

For the second straight game, the president of the Kansas City Fed, Thomas Hoenig, voted against the majority, saying that he no longer needed exceptionally promising to keep rates low.

The Fed kept its key interest rate near zero since December 2008 to protect and help the economy recover from the most severe financial crisis in generations.

The U.S. economy grew again in the second half of last year and expanded 5.9 percent in the last three months of 2009.

The Fed said the labor market was "stabilizing", a more optimistic view than that set out in the January meeting when the statement only indicated that the decline in employment was "moderating".

The U.S. central bank also said that business spending on equipment and software had increased "significantly," an assessment done better than in January.

About the program purchases of mortgage assets, the Fed reiterated that it hopes to conclude in late March, but said it would monitor the economic and financial outlook to see if more support was needed.

In its statement, described the construction activity as "stuck at a low level. In January, made no mention of this sector, but in December said the market had shown some improvement.