INSTANT VIEW: Fed sticks with debt-buying plan

NEW YORK (Reuters) - The Federal Reserve on Wednesday held monetary policy steady and said the U.S. economic recession was easing, as it signaled its worries over a possible troubling downward spiral in prices were easing.

KEY POINTS: * Concluding a two-day meeting, the central bank also said it had decided to hold overnight interest rates in a zero to 0.25 percent range -- the level reached in December -- and repeated that they would likely stay unusually low for some time. * With the benchmark interbank lending rate virtually at zero, the Fed has focused on driving down other borrowing costs by buying mortgage-related debt and U.S. government bonds. * "Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing. Conditions in financial markets have generally improved in recent months. * In the statement, the Fed added that it "will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted."

COMMENTS:

LINDA DUESSEL, EQUITY MARKET STRATEGIST, FEDERATED INVESTORS, PITTSBURGH:

"It was totally as expected. The market doesn't seem to have reacted that much. Everybody pretty much knew that for sure they wouldn't raise rates anytime soon and they wouldn't do anything to withdraw liquidity.

"The inflation question has been something that has been bothering people in the marketplace and what they say here that they expected it to remain subdued for some time. In their last statement they didn't even say 'for some time.'"

CHARLES ROTBLUT, SENIOR MARKET ANALYST, ZACKS INVESTMENT RESEARCH, CHICAGO:

"None of it actually surprised me. I know a lot of traders were looking for clear signs of either an exit strategy for the debt repurchase program or just a sign that the Fed was considering interest rate hikes in the future. And neither of that was provided. But I think, given what we're seeing now, and the current state of the economy, I think the Fed did the right thing by trying to keep yields down.

"I think the big thing is that although economic conditions have improved over past several months, it's important to understand that the economy is by no means out of the woods.

"I think the goal of their statement was to keep mortgage rates from rising too much. Looking at new home sales figures, which were flat the last four months, it was a good instinct for the Fed to try to keep mortgage rates down.

"Right now, the market is trending down. It looks like we'll potentially close with a loss for the day. But the week ahead will see earnings coming out that will likely have an impact, like Nike for consumers and Micron for semiconductors."

ROBERT CALLAHAN, MANAGING DIRECTOR, NEWPORT VALUE PARTNERS, NEW YORK:

"The Fed is trying to reflate this economy, lending banks money at a rate as close to zero as the banks in turn can lend it out at higher rates. They're trying to resurrect the banks. (As far as dropping the reference in the last FOMC statement to 'some risk that inflation could persist for a time below rates that best foster economic growth,') they're reacting to the fact that oil has gone from $40 a barrel to almost $70 a barrel.

"Secondly, notwithstanding yesterday's auction, 10-year yields have been rising... rates have to go up to protect the dollar or it all comes tumbling down."

STEVE VAN ORDER, FIXED INCOME STRATEGIST, CALVERT ASSET MANAGEMENT, BETHESDA, MARYLAND:

"It's essentially the same statement as the last one. They expect inflation to stay subdued. This language reasserts that. They seems to say they are not as concerned with the worst case scenario on deflation.