U.S. Fed resumes meeting, seen set to lower rates

By Mark Felsenthal

WASHINGTON (Reuters) - The U.S. Federal Reserve resumed a meeting on Wednesday that was expected to lead to a quarter-percentage point interest rate cut and possibly a hint that a rate-cutting cycle kicked off last fall may be at an end.

The Fed already has cut benchmark overnight interest rates by 3 percentage points to 2.25 percent since mid-September to shore up the economy and settle jittery financial markets. It will announce its decision on rates and offer an assessment of threats facing the economy at around 2:15 p.m. (1815 GMT).

Fed policy-makers gathered shortly after the government said the economy grew at a sluggish 0.6 percent annual rate in the first quarter, a slightly stronger-than-expected pace, as inventory-building tempered a deteriorating housing market and softer consumer spending.

Another report showed U.S. private sector employers unexpectedly added 10,000 jobs in April, suggesting the economy retained some resilience

"The key here is that a pullback is more shallow than expected," said Marc Pado, a U.S. market strategist at Cantor Fitzgerald & Co. in San Francisco.

The data had little impact on financial market expectations for the Fed meeting. Interest rate futures prices implied an 80 percent chance of a quarter-point reduction and a 20 percent probability the Fed would hold rates steady, little changed from late Tuesday.

Fed policy-makers have been confronting a bleak landscape.

The U.S. housing market has shown no sign of hitting bottom and credit markets still appear strained. At the same, elevated prices for food and fuel are causing concerns among both consumers and Fed officials.