The S&P/TSX composite index ran up 63.71 points to 14,962.24 as the Fed said that it first wants to see further improvement in the economy, particularly in job creation and inflation levels.
The Canadian dollar closed sharply higher as the greenback lost strength in the wake of the Fed's rate announcement, gaining 1.28 U.S. cents to 79.55 cents.
U.S. indexes surged with the Dow Jones industrials ahead 227.11 points to 18,076.19, the Nasdaq up 45.4 points at 4,982.83 and the S&P 500 index 25.14 points higher at 2,099.42.
The Fed also signalled that there could be a rate increase later this year by no longer saying it will be "patient" in starting to raise its benchmark rate.
Analysts noted that a rate hike in June is still a possibility but the Fed won't be in a hurry to raise rates aggressively.
CIBC World Markets economist Andrew Grantham observed that the median forecast for rates at the end of this year was reduced to 0.625 per cent, which is half a per cent lower than in December. And he added that rates at the end of 2016 are now seen at only 1.875 per cent, down from earlier expectations of 2.5 per cent.
Most TSX sectors finished positive, with the energy sector ahead 2.6 per cent as oil prices erased early losses to move higher after six days of steep declines on supply concerns. The April contract in New York gained $1.20 to US$44.66 a barrel even as the U.S. Energy Information Administration reported a 10th straight weekly increase in crude supplies that was more than double what analysts expected.
Inventories have been steadily rising to a point where analysts are concerned that storage space could soon be at a premium, which could drive prices down even further. Prices are already down 60 per cent from the highs of last summer amid a global oversupply of crude.
"It’s very difficult to get a handle on the short-term (price) bottom," said Craig Jerusalim, portfolio manager at CIBC Asset Management.
"However, I do have more confidence in higher longer-term prices because no one is making money at current pricing, which will see a supply response which will ultimately be self-correcting."
The base metals component climbed 0.7 per cent even as May copper fell six cents to US$2.57 a pound.
The gold sector was up 2.6 per cent as April bullion moved $3.10 higher to US$1,151.30 an ounce.
Financials held the TSX back, losing 0.3 per cent.
Power Financial Corp. (TSX:PWF) posted quarterly net income of $506 million or 71 cents per share, down from $593 million or 84 cents per share a year earlier due to unusual items in both years. Excluding those, operating earnings improved to $525 million or 74 cents per share, from $403 million or 57 cents per share. Power is also is raising its dividend by 6.4 per cent to 37.25 cents per share and its shares dropped 47 cents to $37.25.