UPDATE 4-U.S. Fed sees rates near zero for extended period

* Fed repeats to keeps rates low for "extended period"

* Fed sees economic activity continuing to pick up

* Commitment to buy agency debt trimmed to $175 billion

* Fed gives more upbeat assessment on household spending (Recasts with Fed decision)

By Mark Felsenthal and David Lawder

WASHINGTON, Nov 4 (Reuters) - The U.S. Federal Reserve on Wednesday expressed growing confidence that an economic recovery was building, even though it stuck to its commitment to keep borrowing costs near zero for "an extended period."

In a unanimous vote, the Fed's policy-setting Federal Open Market Committee decided to keep its benchmark federal funds rate unchanged in a range of zero to 0.25 percent, as expected.

It said the economy had "continued to pick up" since its last meeting in September, but expressed concern that the economy's recovery was likely to be sluggish.

"Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit," the U.S. central bank said in a statement outlining its decision.

The Fed also said it would buy about $175 billion of debt issued by government-backed mortgage finance agencies, less than the $200 billion maximum it had originally allotted, citing limited availability.

U.S. stocks briefly pared gains, while prices for U.S. government debt fell sharply on the announcement. The U.S. dollar extended losses against the euro.

"I would say there are no surprises at all. If there is any surprise, it sounds like there is not even any hint that they are going to raise rates soon," said Robert MacIntosh, chief economist at Eaton Vance Corp in Boston. "We've got a number of Fed meetings to go before we will get any kind of increase."

MORE UPBEAT, BUT STILL WORRIED

The Fed's closely watched policy statement was somewhat more upbeat than its statement in September, which had referred to spending as "stabilizing."

However, it was also more explicit about why it expects to be able to keep overnight rates, which it cut close to zero in December, exceptionally low for a long time, citing "low rates of resource utilization, subdued inflation trends, and stable inflation expectations."

The central bank, wary of undercutting the fragile recovery by withdrawing its support too soon, has also been on guard for any indication that its emergency lending efforts could fuel an unwelcome bout of inflation down the road.