The Federal Reserve on Tuesday is expected to hold a steady course on monetary policy, acknowledging a mildly brighter economic outlook while refraining from any suggestion that further easing is now off the table.
Indeed, the central bank, sifting through conflicting economic signals, is unlikely to offer much of anything in the way of fresh clues on its policy course after its one-day meeting.
I just don't see them being anywhere near ready and certainly not under any pressure to make any judgment this week about which way things are going to go, said Nigel Gault of IHS Global Insight in Lexington, Massachusetts. This is really the occasion for them to do absolutely nothing.
Fed officials are expected to nod to the labor market's stronger pulse in a statement due at about 2:15 p.m. (1815 GMT). But they are also likely to warn that unemployment is due to decline only gradually given modest demand for goods and services and a still sickly housing market.
Officials may also offer a cautionary note on high energy prices, mindful that a jump in gasoline prices contributed to snuffing out promising signs of recovery last year.
While the Fed's assessment of the recovery will likely shift in deference to the latest data - including Friday's report that showed the economy created more than 200,000 jobs for a third month running in February - most analysts expect its words on policy to be nearly identical to its statement after its last meeting in January.
In January, the Fed said it did not expect to raise interest rates until at least late 2014 - 18 months later than its previous estimate, as the Fed voiced caution about the progress in the economy.
The Fed cut benchmark overnight rates to near zero in December 2008 and has bought $2.3 trillion worth of bonds to push other borrowing costs lower and stimulate growth.
While the economic recovery is nearly three years old, officials lament that the United States is still far from full employment. Although the jobless rate has fallen significantly over the last six months, at 8.3 percent it remains stubbornly high
Tuesday's meeting will close without a news conference by Fed Chairman Ben Bernanke or new economic forecasts to offer policy guidance. Instead, details on the thinking behind the Fed's terse statement will only emerge from speeches by officials and the meeting's minutes, which are released with a three-week lag.
BETS ON BOND BUYING
While the Fed may be content to bide it's time for now, policymakers are likely to debate whether the recovery has taken hold enough to keep the quantitative easing spigot shut.
Even after the Labor Department last week reported the economy added 227,000 new jobs in February, economists at the large institutions that trade directly with the Fed believed the central bank would launch another bond-buying spree worth more than $500 billion.
Many economists think the central bank may hold off a decision until its June meeting. The Fed is currently reweighting its portfolio to push long-term interest rates lower, a program that runs its course at the end of June.
Further policy easing remains an option, and any slippage in progress towards full employment will likely be met by additional asset purchases by the Fed, said Millan Mulraine, senior U.S. strategist for TD Securities in New York.
A Wall Street Journal article on Thursday that said officials were considering buying new bonds but offsetting those purchases with short-term loans to keep the quantity of bank reserves in the system in check fueled speculation that additional purchases were a live option.
Bernanke disappointed some investors by barely mentioning the prospect of an additional round of bond buying in four recent appearances before Congress. Many Republican lawmakers are unhappy with the Fed's asset purchases, which they view as sowing the seeds of inflation, weakening the dollar, and hurting savers.
Against the good news on the job front, policymakers will likely weigh evidence from other quarters, such as a drop in net exports, which suggested growth slowed to under a 2 percent annual pace in the first three months of this year.
Bernanke and other Fed officials have treated improvements in the jobs picture cautiously, expressing puzzlement about the rapid decline in the unemployment rate against a relatively soft growth backdrop. The jobless rate has dropped 0.8 percentage point since August, when it stood at 9.1 percent.
I don't think they're convinced they won't need to add additional stimulus, but the tone of data in last three months seems to have been surprising the Fed to the upside, said Carl Riccadonna, senior U.S. economist for Deutsche Bank in New York.
(Reporting by Mark Felsenthal; Editing by Leslie Adler)