* Fed continues with $40 billion/month bond buying
* Repeats that rates likely to say low through mid-2015
* Sees brighter housing market, more household spending
* Fed acknowledged rise in inflation, views it as temporary
* Richmond Fed's Lacker dissents
WASHINGTON, Oct 24 (Reuters) - The Federal Reserve on Wednesday stuck to its plan to keep stimulating U.S. growth until the job market improves even as it acknowledged some parts of the economy were looking a bit better.
In a statement after a two-day meeting, the central bank repeated its vow to keep rates near zero until mid-2015 and its pledge to keep supporting growth while the recovery strengthens.
The Fed's policy-setting panel made no change in its plan to purchase $40 billion in mortgage-backed debt per month to push interest rates lower and spur a stronger recovery.
``The committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions,'' the Fed said.
Markets largely took the Fed's announcement in stride. U.S. stocks initially slipped but quickly recouped most of their losses to remain up slightly, while prices for U.S. government debt see-sawed. The dollar extended gains against the euro.
The central bank's statement differed little from its announcement last month in which it launched its latest bond-buying program.
``At first glance I don't see any surprises at all,'' said David Sloan, an economist at 4CAST in New York. ``It seems like we had a big meeting last time and this time they have maintained their tone.''
HOUSING BETTER, BUSINESSES WEAKER
The Fed noted the housing sector was continuing to gather its strength and said household spending had grown ``a bit more quickly.'' However, it cautioned that business investment was softening.
It also nodded to a recent increase in inflation but said it was linked to higher energy prices, adding that inflation expectations have remained stable -- a sign it expects price pressures to remain under wraps.
Richmond Federal Reserve Bank President Jeffrey Lacker dissented against the decision, as he has done at every meeting this year.
The central bank's announcement came just under two weeks before the U.S. presidential election. Economists said policymakers were likely happy to keep their heads down and avoid drawing any political fire.
The Fed, which has held rates close to zero since December 2008, had already bought $2.3 trillion in mortgage-related and government debt before it launched its latest round of stimulus.
Some analysts and many conservative politicians have expressed concern the Fed's policies could spark inflation, but prices increases have remained tame so far.
The problem is, growth has, too. U.S. gross domestic product grew at an annual rate of just 1.3 percent in the second quarter. Economists expect the pace of recovery quickened a bit in the second quarter but not by enough to put steady downward pressure on the jobless rate.
At the same time, a looming tightening of U.S. fiscal policy risks tossing the economy back into recession.
Europe's debt crisis, a key source of concern for the Fed, also remains unresolved, although it is not flaring up too wildly in financial markets, offering comfort that the U.S. economy will escape any contagion.
TALKING THE TALK
Aside from their discussion over the stance of monetary policy, officials likely continued to debate fine-tuning their communications strategy by adopting numerical thresholds for economic variables that would guide the central bank's unconventional stimulus.
However, no new announcement was made. Analysts say to look to the Fed's next meetings in December or January for greater clarity on policymakers' goal posts.
Chicago Federal Reserve Bank President Charles Evans has advocated keeping rates near zero until the unemployment rate, currently at 7.8 percent, goes down to 7 percent, as long as inflation does not exceed 3 percent. The central bank formally targets 2 percent inflation.
Officials are also strongly considering the adoption of a consensus economic forecast for the central bank as a whole, as opposed to the quarterly individual projections for growth, employment, inflation and interest rates currently published.
The December meeting is seen as a good time for the Fed to re-evaluate the extent of its monthly bond purchases. In addition to its program to buy mortgage-backed debt, the Fed has been using proceeds from short-term government securities to buy longer-term ones. That program, known as Operation Twist, expires at the end of the year.