While you were sleeping: Fed signals ongoing support

The US economy continues to recover at a pace that still requires ongoing stimulus.

Wall Street advanced as US Federal Reserve policymakers kept its $US85 billion a month bond-buying programme intact as the economy continues to recover at a pace that requires ongoing stimulus.

"The committee sees the downside risks to the outlook for the economy and the labour market as having diminished since the fall," policymakers said in a statement at the end of a two-day meeting while at the same time assessing economic activity as "modest" through the first-half of the year.

The Fed earlier characterised the recovery as "moderate".

"The committee recognises that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term," the Fed said.

It said it decided to continue purchasing additional agency mortgage-backed securities at a pace of $US40 billion per month and longer-term Treasury securities at a pace of $US45 billion a month. It did not indicate when it might adjust its pace of purchases.

"This is pretty much what the market wanted. The Fed will maintain its asset purchases until it sees labour market improvement and it will maintain an accommodative policy after the purchases end," Wayne Kaufman, chief market analyst at Rockwell Securities in New York, told Reuters.

In late afternoon trading in New York, the Dow Jones Industrial Average rose 0.5 percent, the Standard & Poor's 500 Index added 0.59 percent and the Nasdaq Composite Index advanced 0.69 percent. Earlier in the session the Dow hit a record high 15,634.32.

Gains in shares of Bank of America and JPMorgan Chase led the Dow higher.

The US dollar weakened after the Fed statement, sliding 0.4 percent against the euro.

"At the margin, the statement was slightly dovish," Donald Ellenberger, co-head of government and mortgage-backed securities at Federated Investors in Pittsburgh, told Bloomberg News. "In Fed jargon, they offered a slight downgrade to economic and inflation growth."

US gross domestic product climbed at a better-than-expected 1.7 percent annualised rate in the second quarter after a 1.1 percent increase the prior quarter, according to Commerce Department data released today.

Private employers added a better-than-expected 200,000 jobs in July, according to the ADP National Employment Report.

"The economy is improving and the ADP report is emblematic of a pattern of growth that will continue to tilt to the upside," Eric Green, chief economist at TD Securities in New York, told Reuters. "That is enough for the Fed to taper in September."

Shares of Herbalife received a boost, last up 9.5 percent, from a CNBC report that billionaire investor George Soros had taken a large stake in the company.

In Europe, the Stoxx 600 Index closed 0.1 percent higher than the previous close. Germany's DAX also added 0.1 percent, while France's CAC 40 rose 0.2 percent and the UK's FTSE 100 increased 0.8 percent.

The Bank of England and the European Central Bank hold meetings on Thursday.