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The U.S. Federal Reserve left its key interest rate unchanged, at about 0 per cent, as expected. It also left untouched the key phrase that low rates will be needed for "an extended period," which was also expected.

What investors were really looking for here was some indication of how the Fed is seeing the U.S. economy after a number of setbacks - particularly in the labour and housing markets. Here's what the Fed said:

"Information received since the Federal Open Market Committee met in April suggests that the economic recovery is proceeding and that the labour market is improving gradually. Household spending is increasing but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit."

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On housing: "Housing starts remain at a depressed level."

A nod to Europe: "Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad. Bank lending has continued to contract in recent months."

The stock market liked what it saw. Within about five minutes of the release of the Fed's statement, the Dow Jones industrial average switched from a small decline to a slight gain, up 2 points.

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