WASHINGTON: The US Federal Reserve is widely expected to hold interest rates near zero at a monetary policy meeting Wednesday, in a bid to nurture a fragile recovery from recession.

The Federal Open Market Committee (FOMC), headed by Fed chairman Ben Bernanke, likely will stay its highly accommodative course to boost credit flows, the lifeblood of the economy, analysts said.

"We don't expect any change in the underlying federal funds interest rate target, currently zero percent to 0.25 percent, or a change in the timing of the Fed?s removal of its quantitative easing program," said Frederic Dickson at DA Davidson & Co.

At the conclusion of a two-day meeting, the FOMC is expected to announce its rate decision around 2:15 pm (1915 GMT).

Economists and traders will scrutinize the accompanying FOMC statement for signs of the direction monetary policy is taking.

Australia's central bank raised rates a quarter point Tuesday for the second time in as many months, saying the improving economic outlook and expected growth in Asia justified the move. Related article: Australia raises interest rates

The Australian decision increased concerns that the authorities are moving toward reining in some of the massive stimulus measures implemented to combat the worst global slump in decades.

Ian Shepherson, chief US economist at High Frequency Economics, said that Bernanke, an expert on the Great Depression, was virtually certain to steer a steady course while the economy is still in an extremely fragile state.

"If you learn one thing as a student of depressions, it is that premature tightening is the kiss of death," he said.

Bernanke recently signaled there was no hurry to tighten monetary policy, saying action would be taken "when the economic outlook has improved sufficiently."

The FOMC has held its base rate target near zero since last December in a bid to help kick-start the economy out of the worst downturn since the Great Depression.

Boris Schlossberg at Forex Capital Markets said that markets will closley scrutinize the central bank communique.

"The critical focus will be on the following phrase, 'keeping rates exceptionally low for an extended period,'" he said.

"Some analysts have predicted that the Fed will remove the word 'extended,' signaling to the market that it is laying the groundwork for possible normalization of monetary policy in 2010."

But he noted that the Fed has never raised rates until the unemployment rate has peaked and "therefore remains constrained in its policy options by the difficult labor conditions extant in the US economy."

The world's largest economy grew for the first time in a year in the third quarter, at a 3.5 percent annual rate, largely the result of government stimulus spending, official data showed last week.

Economists highlighted that despite the Fed's loose reins, credit remains unusually tight.

"The only expansion effort banks are embracing right now is risk-free lending. Until that view changes, economic performance will remain subpar and policy rates will remain low for an extended period," said Patrick O'Hare at Briefing.com.

"The US economy has a pulse fortunately, yet it's a long way still from having a strong heartbeat because it has such low blood pressure," he added.

The Fed often waits at least several months after unemployment -- a lagging indicator of recovery -- peaks before beginning to raise rates.

The unemployment rate hit a 26-year high of 9.8 percent in September. Most analysts expect a 9.9 percent reading for October.

"The inflation outlook should also remain unchanged, with the committee noting that it expects inflation to remain 'subdued,' on account of the 'substantial resource slack' and stable longer-term inflation expectations," said Millan Mulraine, analyst at TD Bank Financial Group.