The Federal Reserve, in its first meeting since the inauguration of President Joe Biden, who has pledged a swift fiscal response to the Covid-19 crisis, kept its benchmark borrowing rate at 0 percent to 0.25 percent, in line with economists' expectations.

In a statement, the Federal Open Market Committee, the Fed's policymaking group, concluded Wednesday: "The path of the economy will depend significantly on the course of the virus, including progress on vaccinations."

Although some metrics show improvement, the economic picture is mixed at best, with flagging job market gains, anemic retail sales and a pandemic that is still out of control in parts of the country.

"With the recovery slowing, the Fed is a long, long way from raising interest rates or dialing back any of their accommodation," said Greg McBride, chief financial analyst at Bankrate. "The immediate challenges confronting the economy are evidenced by declining retail sales, business failures, job losses and rising long-term unemployment. The Fed's focus remains squarely on the downside economic risks, and they'll err on the side of overaccommodation."

Investors had hoped for reassurance at Fed Chair Jerome Powell's news conference Wednesday that the Fed will continue to hold interest rates near zero for quite some time, and they expect Powell to reaffirm the Fed's open-ended commitment to extremely accommodative policies.

"I think he might make comments to the extent that inflation has started to show some signs of budging, but nowhere to the levels that would alarm," said Anu Gaggar, a senior global investment analyst for Commonwealth Financial Network.

Biden and congressional Democrats have prioritized enacting additional fiscal stimulus on top of the $900 billion in aid to individuals, unemployed workers and businesses that the lame-duck Congress passed just before the new year. Proponents say a robust response is badly needed to mitigate further — perhaps irreversible — damage to the country's commercial activity.

"Suddenly, the explosion for fiscal stimulus seems to ameliorate those concerns in the short term," said Ryan Giannotto, director of research at GraniteShares. "It went literally from one polar extreme to the other."

The risk the Fed runs is that if an epidemiological breakthrough changes the trajectory of the pandemic, a surge of stimulus on top of it could supercharge the economy to the extent that prices rise quickly. That would pressure the Fed to revisit its stance not to raise interest rates sooner than it — and Wall Street — had planned, a recipe for market volatility.

Although skyrocketing inflation is possible, if unlikely, derailing a fragile economy with higher interest rates too soon is by far a greater threat to the recovery, said Gaggar, who said, "The Fed would rather be late than early."

The Fed recently moved to characterize its 2 percent inflation target as an average to be achieved over time. Mark Heppenstall, chief investment officer of Penn Mutual Asset Management, said that gives officials more discretion to adjust rates.

"I think that allows them a lot of flexibility, partly because we've been running below 2 percent for so long. At least for the time being, I think inflation isn't going to be the primary area of focus," Heppenstall said.

"To me, it's a bit too early to start talking about it," he said, because Covid-19 vaccines have yet to be widely available and distributed and because the emergence of more contagious strains of the coronavirus weigh on the country's reopening efforts. "I don't think, until the pandemic is more fully out of our lives, will we begin to talk about it."

Charlie Ripley, senior investment strategist for Allianz Investment Management, said Powell has to thread a needle in terms of both policy and how he communicates the Fed's rationale behind its decisions. "We expect the Fed to continue to reiterate previous messages and signal to the market that the accommodative policy stance is in place for the foreseeable future," he said.

Ripley said Powell is likely to stick to that narrative — going off-script can blindside Wall Street and throw cold water on investor confidence. In 2013, when Chair Ben Bernanke announced plans to taper the Fed's quantitative easing program, markets were briefly thrown into disarray in what was called a "taper tantrum." "The last thing that Powell wants to see is a repeat of the 2013 taper tantrum when the economy is in recovery mode," Ripley said.

Giannotto said: "Maybe once vaccines get greater distribution, we'll have a lot more flexibility there. If they precipitate a loss of confidence, that's far more difficult to try to repair."