Federal Reserve News - Federal Reserve Is Expected

Fed seen holding rates steady

The Federal Reserve headquarters in Washington

The Federal Reserve is expected to keep interest rates unchanged on Wednesday and may struggle to convince skeptical investors it can tighten monetary policy before the end of the year in the face of U.S. and global economic headwinds.

The world's most powerful central bank hasn't hiked rates in about a decade and markets see virtually no chance it will do so at the end of this week's two-day policy meeting. The Fed is scheduled to announce its rate decision at 2 p.m. ET (1800 GMT).

A spate of dismal data on the U.S. and global economies has fueled a public row between Fed Chair Janet Yellen and fellow policymakers, igniting speculation the central bank will wait until 2016 to begin its "liftoff" from near-zero rates.

Forty-six economists polled by Reuters unanimously expect the Fed on Wednesday to keep its target rate for overnight lending between banks steady at 0 percent to 0.25 percent, as it has since 2008 when it embarked on an effort to nurse the economy back from a severe recession.

A narrow majority of the economists expect a rate increase in December. Financial markets assign only a 30 percent chance for a December hike and a 54 percent chance for such a move in March.

The Fed could lay some of the tightening groundwork by using its policy statement to signal it has fewer concerns about global growth. 

Recent U.S. economic reports, however, have raised doubts about the strength of the world's largest economy, and it could be weeks before central bankers have enough new data to feel comfortable lifting rates.

That means the statement on Wednesday could resemble the one from last month's policy meeting. But September's disappointing employment report - non-farm payrolls grew by only 142,000 - has cast doubt on the sustainability of the jobs recovery and undercut the argument for hiking rates.