The Federal Reserve showed on Wednesday it was in no rush to cut short its rescue of the U.S. economy, saying high unemployment still justified its $600 billion bond-buying plan even though the economy has shown some signs of improvement.

In a statement that was a bit more upbeat than after its meeting in December, the Fed acknowledged for the first time a rise in commodity prices that has fueled global inflation, but signaled it would not throw the U.S. central bank off course.

The Fed noted that underlying U.S. inflation has been trending downward, a contrast in tone with other central banks around the world worried about price growth.

The economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions, the Fed said after a two-day policy meeting.

Policymakers unanimously backed continuation of the Fed's bond purchases, the first time there was no dissent since December 2009.

Analysts said the Fed, which detailed the headwinds the economy faces, may have been hesitant to sound too upbeat for fear financial markets would see any optimism as a sign that a tightening in monetary policy was drawing nearer.

Growth in household spending picked up late last year, but remains constrained by high unemployment, modest income growth, lower housing wealth and tight credit, the Fed said.

U.S. interest rate futures showed traders paring bets that the central bank would start raising overnight interest rates this year. The U.S. dollar slipped and prices of U.S. government debt fell, while stocks held gains and closed marginally higher.

The statement doesn't acknowledge the uptick in U.S. economic data that we've seen over recent weeks to the extent that we had expected that it would, said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

Leading U.S. economists boosted their expectations for U.S. growth this year, according to a Reuters poll conducted after the Fed's policy statement.

The Fed's calm view of price pressures is in sharp contrast to the European Central Bank, whose president has warned that the surge in commodity prices poses an inflation threat. While headline inflation has picked up in the United States, core inflation has held near a five-decade low.

Inflation is a rising concern in emerging economies around the world. China and India both face increasing public dissent due to inflationary pressures and central banks in Latin America are considering raising rates despite worries about hurting exports.

POLICY HAS BACKING, FOR NOW

The unanimous vote suggested a firm consensus to see the bond purchase plan through, even as two known skeptics rotated into voting spots on the central bank's policy panel.

Some analysts thought at least one of the vocal inflation hawks -- Philadelphia Federal Reserve Bank President Charles Plosser or Dallas Fed President Richard Fisher -- would dissent.

While the Fed's statement was dovish in the eyes of financial markets, it did contain a few very modest changes from its last policy announcement in December that acknowledged the economy's pulse had grown stronger.

The Fed said the recovery was insufficient to bring about a significant improvement in labor markets, adding the word significant as a nod to the drop in December's jobless rate to 9.4 percent from 9.8 percent the previous month.

Its assessment on spending by households and businesses was also mildly upgraded.

Still, it showed no concern inflation was set to ignite.

Although commodity prices have risen, longer-term inflation expectations have remained stable, and measures of underlying inflation have been trending downward, the central bank said. At best, the language could be seen as a cautious acknowledgment that inflation may have bottomed.

The Fed cut rates to near zero in December 2008 and bought $1.7 trillion in longer-term securities to provide an additional boost to the economy and battle deflation risks.

After the recovery appeared to falter in mid-2010, the central bank launched its latest bond-buying plan to drive borrowing costs down further.

The U.S. economy is expected to have expanded by a reasonably robust 3.5 percent annual rate in the fourth quarter after growing at a 2.6 percent pace in the July-September period. Similar vigor early in the new year may make the case for an ultra-accommodative monetary policy harder to sustain, even if unemployment remains relatively high.

The government is to release its first reading on fourth-quarter GDP on Friday.

Economists at the 18 U.S. primary dealers -- the large financial institutions that do business directly with the Fed -- gave a median forecast for annualized GDP growth in 2011 of 3.23 percent, according to the Reuters poll on Wednesday. That was up from an outlook of 3.10 percent growth in a similar poll on January 7. [ID:nN26294418]

Low levels of inflation outside of food and energy costs had spurred worry at the Fed about a vicious cycle of falling prices and declining spending and investment. But the brighter economic signs have left Fed officials breathing easier.

We're seeing some improvement in the labor market. I think deflation risk has receded considerably. And so we're moving in the right direction, Fed Chairman Ben Bernanke said on January 13.

Still, officials realize it will take a long time to fill the hole left by the 2007-2009 recession and they have set a high bar for any changes to their bond-buying plan, which markets expect to be completed in full.

(Additional reporting by Pedro Nicolaci da Costa, Emily Kaiser and David Lawder; Editing by Leslie Adler and Dan Grebler)

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