Fed starts meeting, seen hewing to easy-money course

By Mark Felsenthal

WASHINGTON (Reuters) - The U.S. Federal Reserve began a two-day meeting on Tuesday that is expected to end with a reaffirmation that policies to support the economy will stay in place for some time, even as signs of recovery mount.

In particular, the Fed is not expected to soften its commitment to hold benchmark interest rates exceptionally low for "an extended period."

While the U.S. economy appears to have broken free of its deepest recession since the 1930s, doubts remain about whether a recovery can be sustained without government backing.

"It doesn't seem that it would do the Fed much good at this point to alter that language," said Barclays Capital economist Michelle Meyer. "They're much more concerned about the sustainability of the recovery ... rather than inflation concerns."

The Fed will issue a statement around 2:15 p.m. (1915 GMT) on Wednesday. While it is expected to nod to modestly encouraging economic signs, analysts expect a cautious tone on policy.

The economy grew at a 3.5 percent annual pace in the third quarter, the government said last week. Reports on Monday showed manufacturing activity rallied in October and pending homes sales surged unexpectedly in September.

Fed officials have taken note of the widening signs of recovery, but with unemployment likely to move higher, they have said ensuring the upturn does not wither is a priority.

"We have to think about our exit policy and are looking at it very carefully, but at the moment, that's not our first order concern. At the moment, it's policy accommodation," Chicago Federal Reserve Bank President Charles Evans, a voter on the Fed's policy-setting panel, said on Oct. 22.