WASHINGTON (AP) — The Federal Reserve ends a two-day meeting Thursday with expectations high for some new action to jolt the lackluster U.S. economy.
Many investors hope the Fed will take the bold step of launching a third bond-buying program. The goal would be to try to lower long-term interest rates and spur borrowing and spending.
Further bond purchases could also boost stock prices. Higher stock prices increase wealth and typically lead individuals and businesses to spend more.
Some economists think the Fed might put off any new bond buying but extend its timetable for any increase in its benchmark short-term rate. The Fed's current target for any rate increase is late 2014 at the earliest.
Fed officials began their discussions Wednesday and will conclude with an announcement Thursday afternoon. The Fed will later release updated projections for economic growth, unemployment and inflation. And Chairman Ben Bernanke will hold a news conference.
The Fed is under pressure to act because the U.S. economy is still growing too slowly to reduce high unemployment. The unemployment rate has topped 8 percent every month since the Great Recession officially ended more than three years ago.
In August, job growth slowed sharply. The unemployment rate did fall to 8.1 percent from 8.3 percent. But that was because many Americans stopped looking for work, so they were no longer counted as unemployed.
Still, the Fed might feel a bit less pressure to act now that the European Central Bank has said it's prepared to buy unlimited amounts of government bonds. The ECB program could help lower borrowing costs for European nations struggling with heavy debts.
Others analysts think the Fed might be reluctant to launch further bond buying in the final two months before the presidential election, especially because many Republicans have been critical of its bond purchases.
Here are some of the options for Fed action:
— BOND BUYING
The biggest step would be a third round of bond purchases. In two previous bond-buying programs, the Fed bought more than $2 trillion of Treasurys and mortgage-backed securities after the 2008 financial crisis.