U.S. Federal Reserve seen staying on easy-money path

By Mark Felsenthal

WASHINGTON (Reuters) - The Federal Reserve on Wednesday is expected to reaffirm its intention to keep U.S. interest rates at ultra-low levels for a long time to support the economy, even as signs of recovery accumulate.

The Fed's policy-setting Federal Open Market Committee resumed a two-day meeting at about 9 a.m. (1400 GMT), a Fed spokesperson said. The Fed will issue a statement around 2:15 p.m. (1915 GMT).

The U.S. central bank cut overnight rates close to zero percent last December and it has vowed to keep them there for an "extended period." While some analysts think the Fed could start to tip-toe away from that pledge, most say it is too soon.

"Once they start removing that, that's a real sign that they intend, within six months, to start raising rates," said Deutsche Bank economist Torsten Slok. "But it's just premature, looking at the economic numbers, to arrive at that conclusion."

Analysts expect the Fed to nod to modestly encouraging signs suggesting the economy is gaining strength, but still expect a cautious tone on policy.

A private report issued early on Wednesday showing U.S. companies cut payrolls at the slowest pace in more than a year may add to a sense that the economic numbers are moving in the right direction.

A government jobs report on Friday is expected to show a similar pattern in payrolls, though the unemployment rate is forecast to rise to 9.9 percent.

Policymakers will need to take into account the economy's faster-than-expected 3.5 percent annualized growth rate in the third quarter, which effectively signaled the end of the most painful recession since the 1930s. Suggesting further momentum, data on Monday showed manufacturing activity hit its highest level in 3-1/2 years last month.