What the Fed is considering at this week's meeting

By Ros Krasny

CHICAGO (Reuters) - The Federal Reserve meets this week at a time when the U.S. economy has shown some signs of improvement, and the central bank is likely to restate its support for boosting the economy through both conventional and unorthodox means.

Economists expect the U.S. central bank to hold its target range for its benchmark federal funds rate steady at zero to 0.25 percent, as it has since December, and to indicate again that it will keep interest rates low for some time.

In fact, many analysts suggest that the Fed will not raise the funds rate until anywhere from 2010 to 2012, even if other, alternative stimulus measures can be wound down sooner.

"Nothing is expected to come out of this meeting after the bombshell announcement of buying Treasuries at the last meeting," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi in New York.

The U.S. economy remains in a severe contraction, but signs are emerging that the pace of rate of decline has slowed.

Analysts said the Fed will attempt to tread carefully between acknowledging a slight improvement in economic conditions and the risk of pushing up longer-term inflation expectations and long-term bond yields.

"In the event that the FOMC statement makes a discreet reference to improved market/economic dynamics ... bond yields could easily snap back up," said Ashraf Laidi, chief market analyst at CMC Markets in New York.

The Fed is expected to issue its policy statement around 2:15 p.m. EDT on Wednesday.