The U.S. Federal Reserve on Wednesday kept its benchmark interest rate unchanged at the record-low level of near zero and expected it to remain zero through 2023, as inflation debate heats up, driven by COVID-19 vaccination progress and the latest relief package.

"Following a moderation in the pace of the recovery, indicators of economic activity and employment have turned up recently, although the sectors most adversely affected by the pandemic remain weak," the Fed said in a statement after concluding its two-day Federal Open Market Committee (FOMC) meeting.

Inflation is expected to rise to 2.4 percent this year, which is temporarily above the central bank's 2 percent target. 

"Our ability to achieve maximum employment in the year ahead depends importantly on having a longer term inflation expectations well anchored at 2 percent," Fed Chairman Jerome Powell said at a press conference Wednesday afternoon.

Powell said everyone on the FOMC, the Fed's policy-making body, agreed that there are three criteria for liftoff: maximum employment, 2-percent inflation not on a transitory basis, inflation on track to run moderately above 2 percent for some time.

6.5% U.S. economic growth

Fed officials expect the U.S. economy to expand by 6.5 percent this year due to stimulus and vaccine rollout, which is better than the previous forecast of 4.2 percent in December.

"The path of the economy continues to depend significantly on the course of the virus and measures undertaken to control its spread," Powell said.

The Fed also said it will continue an asset purchase program, and buys at least $120 billion of bonds a month, increasing its holdings of Treasury securities by at least $80 billion and of agency mortgage-backed securities by at least $40 billion.

"These measures, along with our strong guidance on interest rates and on our balance sheet, will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete," Powell said.

The newly passed $1.9-trillion relief package, the first legislative victory for President Joe Biden, went into effect over the weekend, with some Americans already receiving $1,400 direct payments.

The massive relief package, which is expected to help fight the pandemic and bolster the ravaged economy, could also lead to an overheated economy, inflationary pressures and rising interest rates, economists have warned.

(Video contributed by CGTN's Giles Gibson)

(With input from Xinhua)