Rate hikes a distant prospect for more upbeat Federal Reserve

WASHINGTON,| Wed Apr 25, 2012 – The Federal Reserve may appear slightly more upbeat on the economy on Wednesday, though investors should not mistake this cautious optimism for any desire to raise interest rates soon.

Instead, central bank officials will probably reiterate their expectations that official borrowing costs will remain near zero until at least late 2014, and leave open the option to ease policy further if the economy worsens.

“The meeting tomorrow is unlikely to provide any new clues to the Fed’s next actions, rather leaving open the possibility of new measures depending on the economic outlook,” said Richard Gilhooly, a bond market strategist at TD Securities.

Investors wishing for clues to the prospect of a further easing of monetary policy from the central bank may be disappointed, leaving the stock market vulnerable to some selling. Analysts will be keen for any hints of action following the end of the Fed’s Operation Twist, its latest effort aimed at keeping down long-term rates.

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