Fed holds rates, bond-buy plan (by Greg Robb)

WASHINGTON (MarketWatch) - The Federal Reserve on Tuesday said a run-up in commodity prices is unlikely to result in a sustained inflation increase as it left its key short-term interest rate unchanged at a record low and continued its plan to buy government bonds.The decision was expected by financial markets. The vote by the committee was unanimous. In a statement, the Fed said it would "pay close attention to the evolution of inflation and inflation expectations." The Fed said the inflation increase from the rise in commodity prices would be transitory. The Fed was more upbeat about the economic outlook, saying the economy was on firmer footing and conditions in the labor market "appear to be improving gradually."