The Federal Reserve is expected to stay in a holding pattern on Tuesday as top policy officials evaluate the recent launch of a massive bond-buying program to boost the U.S. economy and how fresh fiscal stimulus might help do the job for them.

The last scheduled meeting of Fed policymakers in 2010 got under way at 8:30 a.m. (1330 GMT) as scheduled, a Fed spokesman said. A statement is expected at about 2:15 p.m. (1915 GMT).

The meeting follows a dramatic rise in yields on Treasury bonds, something the U.S. central bank probably had not expected to see so soon after launching the latest stimulus. But they are unlikely to show any signs of scaling it back.

Fed officials will likely be revising their economic outlook to reflect stronger growth after the White House and congressional Republicans agreed to extend tax breaks and provide a payroll tax cut, effectively delivering fresh fiscal stimulus.

The continuing recovery in the economy and the likelihood of a tax deal could be recognized with somewhat more enthusiastic language about growth, said UBS economist Maury Harris in New York, Although the recent run-up in interest rates could offset some of the positive growth impact of the still-debated tax deal.

The Fed's announcement in November that it would launch purchases of $600 billion of longer-term Treasuries, although it had been telegraphed for months, came under attack from critics who charged the Fed with instigating competitive currency devaluations by weakening the dollar and potentially creating an inflationary monster.

With benchmark short-term interest rates near zero, one intended impact of the bond-buying program -- referred to as QE2 because it is the second round of quantitative easing -- was to lower longer-term borrowing costs. However policymakers will ponder why rates for the benchmark 10-year Treasury note have surged in recent weeks.

Some at the Fed believe rates jumped partly in response to the unusually strong attacks on the bond buying by Republican lawmakers, whose star is in the ascendant after electoral gains that won them control of the House of Representatives.

Fed officials guard their political independence jealously and have made clear they will do whatever is necessary to fulfill their mandate of both fighting inflation and maintaining full employment. However, there will undoubtedly be a vigorous debate among policymakers about whether the Treasury sell-off reflects nervousness about the exploding U.S. debt and Washington's future credit-worthiness and future inflation, or whether investors are anticipating a return to stronger growth in months to come.

It is plain that a substantial element of the market believes that the resumption of QE poses a real inflation threat, said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York. QE just makes many investors nervous.

Some economists have estimated the tax cut deal could boost growth in 2011 by a full percentage point. The deal cleared its first hurdle in Congress on Monday and could be approved by both chambers of Congress by the end of the week.

The realization of above-trend growth in the first half of the year will remove some of the urgency felt last summer to give the economy a shot of adrenaline, said Michael Feroli, chief U.S. economist for JPMorgan Chase in New York.

Economic data has also shown glimmers of improvement, with November consumer sentiment hitting its highest level since June and recent declines in the number of workers filing for unemployment insurance.

However, the job market remains grim as unemployment rose to a lofty 9.8 percent in November, while core inflation was at a record low in October.

Higher longer-term rates may also deal yet another set-back to battered U.S. housing markets.

Fed officials may use the meeting to start to stake out positions on any further Fed easing. However, with the program just out of the starting blocks, the debate is unlikely to be reflected in the post-meeting statement.

It is too soon to make decisions, said Douglas Lee of Economics from Washington.

(Editing by Leslie Adler)