Fed meeting gets under way, policy seen on hold

WASHINGTON, April 28 (Reuters) - The Federal Reserve began a regular two-day meeting on Tuesday that was expected to leave policy unchanged as the central bank weighs scattered signs of economic stability and the impact of its own recent actions.

A Fed official said the Federal Open Market Committee (FOMC) began deliberations at 2:00 p.m. It is expected to issue a statement of its policy decisions and economic assessment around 2:15 p.m. (1815 GMT) on Wednesday.

The U.S. central bank has cut interest rates to almost zero and flooded financial markets with dollars to lean against the most severe recession in a generation.

In addition, it surprised observers with a massive $1.15 trillion purchase program of mortgage debt and long-dated Treasury securities at its last meeting, and was expected to prefer to take stock of this and other recent credit-easing measures before taking additional policy steps.

The meeting keys off economic forecasts by the Fed staff and, thanks to signs of stability, it was unlikely these would have been lowered since the last FOMC gathering.

"The stability of those forecasts is itself a significant development, following the significant downward revisions that took place at recent meetings," wrote former Fed Board Governor Laurence Meyer at Macroeconomic Advisers in a client note.

"(It) supports the prospect that there will be no major further policy initiative at this meeting," he said.

Policy-makers will still have plenty to talk about, including their exit strategy to prevent inflation picking up in the future as an economic recovery gets under way, thanks to the powerful monetary stimulus the Fed has undertaken.

Fed officials have taken note of this duty in recent speeches, although economists don't think they will be ready to raise interest rates until 2010, or even 2011, and the Fed has said it will keep rates low for an "extended period."