Federal Reserve policymakers are gathering to take fresh stock of the nation's fragile economic climate, and weighing whether existing programs to ease the recession should be tweaked.
Fed Chairman Ben Bernanke and his colleagues opened a two-day meeting Tuesday afternoon amid scattered signs of economic improvements, but also investor fears that the central bank's aggressive efforts to jolt the economy back to life could spark inflation later on.
Against that backdrop, most economists predict the Fed won't take any major new action to bolster the economy.
The Fed is all but certain to hold its key bank lending rate at a record low between zero and 0.25 percent when the meeting concludes today and probably through the rest of this year, economists said.
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That means commercial banks' prime lending rate, used to peg rates on home equity loans, certain credit cards and other consumer loans, will stay around 3.25 percent, the lowest in decades.
However, the Fed could opt to slow down its already-announced purchases of either government debt or mortgage-backed securities. Doing so could help avert possible market disruptions, help ease fears about a stimulative overdose that could trigger future inflation and make it easier for the Fed to reel in these programs once the economy rebounds.
In March, the Fed launched a bold $1.2 trillion effort to drive down rates on mortgages and other consumer debt, to try to revive lending and get Americans to spend more freely again. It said it would spend up to $300 billion to buy long-term government bonds over the next six months and boost its purchases of mortgage securities. So far, the Fed has bought about $177.5 billion in Treasury bonds.
The Fed is on track to buy up to $1.25 trillion worth of securities issued by Fannie Mae and Freddie Mac by the end of this year or early next year. Nearly $456 billion worth of those securities have been bought so far.