Fed seen on hold as outlook uncertain

By Kristina Cooke

NEW YORK (Reuters) - The U.S. economy may have turned a corner after the deepest recession in some 70 years, but Federal Reserve policymakers appear to be in no rush to raise interest rates.

The Fed is widely expected to keep its benchmark interest rate where it has been since December -- near zero -- when it meets this week.

With underlying inflation pressures actually decreasing and most Fed officials expecting the recovery to be slow, there is little incentive for the Fed to change its easy money policy.

"Anybody who expects major changes to the Fed's statement is likely to be disappointed," said Stephen Stanley, U.S. economist at RBS.

Fed officials, who meet on Tuesday and Wednesday, could discuss how they will prepare markets for an eventual policy shift, but analysts say it is too soon for the Fed to even hint toward an exit by tweaking its pledge to keep rates extraordinarily low for an "extended period."

Even as the U.S. economy appears to be still in need of Fed support, the repercussions of emergency monetary policies are being felt around the world.

Brazil has acted to stem the flood of speculative capital to its economy by adopting a 2 percent tax on foreign investment. Other nations have begun to intervene to keep their currencies from rising too sharply against the falling dollar.

Among top Fed officials a debate has broken out about how soon the central bank will need to act to nip inflation in the bud, although none are advocating a move now.