* Fed says economy on "firmer footing," jobs improving
* Food, oil inflation likely to be "transitory"
* Will monitor inflation, expectations closely
* Unemployment remains high, housing weak
(Updates with market close)
By Pedro da Costa and Mark Felsenthal
WASHINGTON, March 15 The Federal Reserve said
on Tuesday the U.S. recovery is gaining traction and inflation
pressure from soaring energy costs should be short-lived,
allowing it to maintain its heavy support for the economy.
The U.S. central bank decided unanimously to forge ahead
with its $600 billion bond-buying plan despite a considerably
more upbeat assessment of the economy and the job market
It made no mention of Japan, which is grappling with the
aftermath of the country's worst earthquake on record -- and
struggling desperately to avert a nuclear disaster.
"The economic recovery is on a firmer footing, and overall
conditions in the labor market appear to be improving
gradually," the Fed said in a post-meeting statement.
It was a much rosier outlook than the Fed had offered after
its last meeting in January, when it characterized the recovery
as still too weak to significantly bring down unemployment.
The statement also dropped a reference to economic progress
being "disappointingly slow" and a list of roadblocks to
consumer spending. In addition, it removed a passage stating
that employers remained reluctant to hire.
"The Federal Reserve is setting the stage for an end to its
aggressive monetary support for the U.S. economy," said
Augustine Faucher, director of macroeconomics at Moody's
Analytics. "The economic data have been stronger, markets are
generally positive, and job growth is picking up."
However, meeting as global stock markets plunged in the
aftermath of the Japanese earthquake, policymakers noted U.S.
unemployment remains high, underlying inflation low and the
housing sector depressed.
The Fed reiterated a pledge to keep interest rates,
currently near zero, at very low levels for an extended period.
That puts it at odds with other prominent monetary authorities
like the European Central Bank, which has signaled a rate hike
could come next month.
U.S. stocks trimmed losses after the Fed decision, but
still closed down more than 1 percent. The dollar held steady
against a broad basket of major currencies, while U.S.
government debt prices pared earlier gains.
Text of Fed's statement: [FED/FOMC]
Snap Analysis on changes to statement: [ID:nN15246290]
Instant view: [ID:nN15261210]
For more stories on Fed policy, see [FED/AHEAD]
TOUGH TALK ON INFLATION
The Fed dedicated an unusually large portion of its
statement to inflation concerns surrounding a recent spike in
energy and food prices. It said it would monitor inflation and
expectations for future prices closely, but added that the
situation appears to be under control.
"Long-term inflation expectations have remained stable, and
measures of underlying inflation have been subdued," it said.
Since the Fed's January meeting, the economy has continued
to show signs of promise, with the unemployment falling to 8.9
percent in February from 9.8 percent in November.
Still, the pace of hiring suggests further progress will be
painfully slow for the 8-million-plus Americans who lost their
jobs during the economic slump of 2007-2009.
At the same time, higher gasoline costs have created fresh
concerns for consumers, with a big hit to confidence this month
raising concerns whether a recent spurt in consumer spending
can be sustained.
The U.S. economy expanded at an annual rate of 2.8 percent
in the fourth quarter, a respectable performance but a faster
pace will likely be needed to make a further appreciable dent
After chopping overnight interest rates to near zero in
December 2008, the Fed turned to buying mortgage and Treasury
debt to keep long-term borrowing costs low and support the
economy. In all, it has pledged to buy $2.3 trillion in debt.
The purchases have proven controversial, with domestic
critics arguing the Fed is courting inflation while officials
in emerging markets have accused the central bank of trying to
boost U.S. exports by devaluing the dollar.
(Reporting by Pedro Nicolaci da Costa; Editing by Kenneth