Snap Analysis: Fed shows no inclination to trim bond buying

NEW YORK (Reuters) - The Federal Reserve gave a cautious assessment of the U.S. economic recovery on Wednesday and offered no sign it was toying with the idea of trimming its $600 billion bond-buying plan.

The changes in the Fed statement, as expected, were only incremental from what it said after the previous meeting on December 14.

It offered a somewhat warmer view of the economy but not so much as to suggest discomfort with its current policy, and the Fed kept its eyes on low core inflation, which it said has been "trending downward."

Below are the changes in the Fed's language, compared with December's wording.

December meeting:

"The economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment."

January meeting:

"The economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions."

Takeaway:

The Fed is taking into account the drop in the unemployment rate in the December jobs report but is suggesting a lot more work remains to be done.

December meeting:

Longer-term inflation expectations have remained stable, but measures of underlying inflation have continued to trend downward.

January meeting

Although commodity prices have risen, longer-term inflation expectations have remained stable, and measures of underlying inflation have been trending downward.

Takeaway:

The Fed specifically mentions commodity prices but stresses longer-term inflation expectations are stable. The Fed is downplaying the importance of the recent increase in headline inflation.

December meeting:

"Growth in household spending is increasing at a moderate pace, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit."

January meeting:

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

Takeaway:

The Fed is nodding only cautiously to rising consumer spirits late last year.

December meeting:

"Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in non-residential structures continues to be weak. "

January meeting:

"Business spending on equipment and software is rising, while investment in non-residential structures is weak."

Takeaway:

Cuts modifying phrase "less rapidly than earlier in the year."

December meeting:

"... intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month."

January meeting:

".... intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011."

Takeaway:

Doesn't specify the pace per month.