The Federal Reserve on Wednesday said the recovery was proceeding more slowly than it had expected, but it offered no hint of further monetary support, saying growth should pick up soon.

It pinned both a slowdown in growth and a quickening of inflation partly on temporary factors, including higher commodity prices and supply chain disruptions from Japan's devastating earthquake.

The U.S. central bank said the forces pushing up prices should dissipate, allowing inflation to subside to levels consistent with price stability, even as growth revives.

The slower pace of recovery reflects in part factors that are likely to be temporary, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply-chain disruptions associated with the tragic events in Japan, the Fed said in a statement at the conclusion of a two-day meeting.

As widely expected, the Fed said it will maintain interest rates at exceptionally low levels for an extended period. It also confirmed it was ending its $600 billion bond-buying program at the end of the month, while reiterating that it will continue to reinvest principal payments from its holdings.

U.S. stocks were mostly flat after the Fed's statement as investors awaited a 2:15 p.m. news conference by Fed Chairman Ben Bernanke. Prices for U.S. government bonds were also nearly flat and the dollar was little changed against the euro and the yen.

There are no hints of further easing from the Fed, said Nick Bennenbroek, head of G20 forex strategy at Wells Fargo in New York.

LONG CRAWL BACK

Two years after the end of the U.S. recession, the recovery looks disappointingly weak.

While Fed officials have persistently said they expect growth to accelerate, reports since the Fed's April meeting show a clear loss of momentum in the world's largest economy.

Employers have been reluctant to hire and the jobless rate remains stubbornly high, climbing to 9.1 percent in May.

The Fed downgraded its view of the labor market, saying it had been weaker than anticipated. That contrasted with the statement after its last meeting in April when it said the job market was improving gradually.

The Fed statement did not offer any real surprises, but it did confirm the job situation is much weaker than was expected, said Daniel Penrod, senior industry analyst at the California Credit Union League in Ontario, California.

The likelihood is that because of the weakness in the jobs sector, rates are going to stay low.

With jobs uncertain and home values falling, consumer spending, which makes up around 70 percent of U.S. GDP, has lagged. Factory activity has been sluggish as well.

The economy grew at just a 1.8 percent annualized rate in the first three months of the year. Analysts expect growth in the second quarter to log a rate of around 2 percent, still not sufficient to generate a big uptick in hiring.

The Fed in April forecast the economy would grow between 3.1 percent and 3.3 percent in 2011 and 3.5 percent to 4.2 percent next year. It releases fresh forecasts later on Wednesday.

The Fed cut interest rates to near zero in December 2008 and is on track to buy $2.3 trillion worth of longer-term securities by the end of June. The latest buying program -- purchases of $600 billion worth of Treasuries -- ends June 30.

By committing to reinvest proceeds from maturing debt it holds, the Fed will keep its balance sheet -- and support for the economy -- from dwindling.

Analysts have begun to speculate that the Fed might begin to consider further steps to spur growth, although officials have made clear the bar to a further easing of monetary policy is high.

Bill Gross, co-chief investment officer of PIMCO, the world's top bond manager, said on Wednesday that the central bank would likely hint at further steps to help the economy at an annual conference in August in Jackson Hole, Wyoming.

(Editing by Andrea Ricci and Tim Ahmann)

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