The Federal Reserve signaled on Wednesday it is in no rush to scale back its extensive support for the U.S. economy and said a run-up in commodity prices that has dented growth should be fleeting.

KEY POINTS: * The Fed's policy-setting Federal Open Market Committee said in a statement after a two-day meeting it intends to complete its $600 billion bond buying program in June as scheduled. * Despite some headwinds, the U.S. central bank indicated that it believed the economic recovery was proceeding at a moderate pace, with little risk an inflationary psychology would take hold. * Inflation has picked up in recent months, but longer-term inflation expectations have remained stable and measures of underlying inflation are still subdued, it said.

COMMENTS:

BRET BARKER, PORTFOLIO MANAGER AT TCW, LOS ANGELES:

We did not expect any material surprises in the FOMC statement and there was none. It remains quite dovish. It could be argued they slightly downgraded growth and maintained the view that inflation is 'transitory.' It was very boilerplate.

SEAN INCREMONA, ECONOMIST, 4CAST LTD, NEW YORK:

There were no surprises, they largely stuck to the script from what I can see at first glance. Policy is unchanged, which is what was expected.

It was out baseline projection that they would complete the QE2 program in full through June. There was some question about whether they could maybe taper it but the plan that we saw in November is intact.

IGOR CASHYN, INTEREST RATE STRATEGIST, MORGAN STANLEY, NEW YORK:

I think it was largely as expected, the extended language stayed. They are viewing the inflation pickup as transitory, which makes sense because core PCE is still at 0.9 percent year-on-year which is still a way off from the 1.6 percent that they expect. Inflation expectations over the longer term are still stable.

DAVID SLOAN, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS:

The latest FOMC statement makes only subtle changes to that released on March 15, but sounds a little more concerned about rising inflation but a little less positive on growth, and makes it clear QE2 will be complete at the end of this quarter, thus no tapering into Q3. On growth the FOMC state that the recovery is proceeding at a moderate pace rather than on a firmer footing, which seems slightly less upbeat. However they state explicitly that inflation has picked up rather than simply commodity prices are putting upward pressure on inflation, hinting at a heightened degree of concern, though it still sees underlying inflation as low relative to the mandate and notes stable longer-term inflation expectations and subdued underlying inflation. There were no adjustments to QE2 though is made explicit that the program will be completed by the end of the current quarter (the word complete was absent on March 17). This appears to be satisfactory to the hawks, who give no dissent.

MARKET REACTION: STOCKS: U.S. stock indexes added to gains BONDS: U.S. bond prices added to losses FOREX: The dollar added to gains

Inflation