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

KEY POINTS:

* As expected, the Fed kept its benchmark federal funds rate unchanged in a range of zero to 0.25 percent, and said the economy had "continued to pick up" since its last policy-setting meeting in September.

* "Information received since the Federal Open Market Committee met in September suggests that economic activity has continued to pick up," the committee said in its statement.

* The Fed said it would reduce its planned purchases of agency debt to about $175 billion from $200 billion, saying that "while somewhat less than the previously announced maximum of $200 billion, is consistent with the recent path of purchases and reflects the limited availability of agency debt."

COMMENTS:

TOM HARTMANN, BROKER, ALTAVEST, MISSION VIEJO, CALIFORNIA:

"The Fed is still looking for the low rates for an extended period of time. The easy monetary policy is here to stay for a little longer. Rates are not to be raised until at least 2010. The conditions remain in place for gold to continue to move higher, even though it's not going to be a straight line up.

"The Fed's reasoning for feeling comfortable with keeping rates low is that it doesn't see inflation fundamentals in the market. That maybe true in the classic sense of inflation, but if we look at how the falling dollar is affecting commodity prices, that is inflation, one way or another."

JOHN CANALLY, ECONOMIST LPL FINANCIAL, BOSTON:

"The Fed just kicked the can down to the next meeting, which will now probably be when they remove the 'extended period' language. The Fed is on hold for a little longer and to some that may be raising concern about the risk of policy mistake down the road."

STEVE GOLDMAN, MARKET STRATEGIST, WEEDEN & CO., GREENWICH, CONNECTICUT:

"The Fed's report is positive, the (stock) market reaction not as great, and due to the fact that we've had such a nice gain these past eight months."

DAN COOK, SENIOR MARKET ANALYST, IG MARKETS, CHICAGO

"There is a bit of back and forth (in the market) as people

interpret it. (There is) Not to much of a change. There had been a little bit of speculation that the Fed might talk about when they're going to (raise interest rates). But it's still a weak recovery at best and we still have a terrible employment situation. It's pretty standard on what we expected from the Fed today.

KEITH SPRINGER, PRESIDENT, CAPITAL FINANCIAL ADVISORY SERVICES, SACRAMENTO, CALIFORNIA:

"It was expected, absolutely expected. Nobody thought the Fed was going to raise interest rates, the unemployment rate is too high, there is no sense of any inflation, anywhere now or in the future. There was no question in my book that they were going to keep rates where they were. The only threat would be the dollar, but the low dollar is actually a good thing. If you can create a low dollar and keep a low dollar, it helps imports and exports. All of this was really as expected.

"But it's a very positive statement, the longer the Fed can keep interest rates low, the better it is for the economy. If there is no inflation, why not keep it low? There is really no inflationary threat out there, and that is the only reason you wouldn't keep interest rates low. We've got a lot of rebuilding and repairing to do in the economy and this is really going to help, this is a big step. This may even end the little correction we've been having and start the next leg to a new high."

ROBERT MACINTOSH, CHIEF ECONOMIST, EATON VANCE CORP, BOSTON:

"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.

"Some people were thinking they were going to tweak the language a little bit to give them an opening. I don't see that at all.

Reduced agency purchases: "That's part of trying to get their fingers out of the pie, to some extent. They don't want to keep money in here when they don't need to. All that input, so to speak, was really to prevent a meltdown, and that's been achieved. They just don't need to do that any more.

"We got a number of Fed meetings to go before we will get any kind of increase. It just tells you how much spare capacity is out there both the physical and labor sides of the economy."

MIKE FITZPATRICK, VICE PRESIDENT, MF GLOBAL, NEW YORK.

"It was no surprise and nothing in the statement makes me think policy changes are imminent."

JOSEPH TREVISANI, SENIOR MARKET ANALYST, FX SOLUTIONS, SADDLE RIVER, NEW JERSEY:

"As expected the Fed did not change the fed funds target rate and the FOMC statement looks to increasing economic strength and growth. It does not mention the withdrawal of quantitative easing and the statement is neutral for the dollar."

MARKET REACTION:

STOCKS: U.S. stock indexes pared gains, then rebounded.

BONDS: U.S. Treasury debt prices were little changed.

DOLLAR: U.S. dollar jumped against the yen and fell against the euro briefly before snapping back.