With the scent of economic revival in the air, Federal Reserve policymakers gathered on Tuesday amid widespread expectations they will end an aggressive year-long round of U.S. interest-rate cuts.

Analysts believe rate-setting members of the Federal Open Market Committee, who chopped borrowing costs 11 times last year, will see enough glimmers of hope to conclude the gloom of recession that settled over the world's richest economy in March was lifting.

``The economy is just about at the cusp of recovery. The recession may not be fully over but it is close to being over,'' said economist Mark Zandi of Economy.com in West Chester Pa. ''That will make the FOMC cautious about easing more now.''

FOMC members were scheduled to meet over two days, issuing a concluding statement on Wednesday at about 2:15 p.m. (1915 GMT), with fully 22 of 24 top bond dealers surveyed by Reuters predicting no change in rates.

Sentiment on what the meeting would yield shifted radically after Fed Chairman Alan Greenspan last week backtracked from a cautious speech on Jan. 11 in which he warned the U.S. economy still faced ``significant risks'' and that it was ``premature'' to say the forces were in place for a sustained recovery.

The Jan. 11 speech had convinced many in the markets that one more rate cut was in the offing. But that view changed after Greenspan told Congress the economy may be at a turning point, although he cautioned that a recovery may not be as sharp as some on Wall Street had expected.


Since the beginning of last year, the Fed has dropped its benchmark federal funds rate by a whopping total of 4.75 percentage points to a 40-year low 1.75 percent.

In one of its most active rate-cutting years in history, the Fed trimmed borrowing costs at every one of eight scheduled FOMC meetings in 2001 and three times in between.

Initially, the U.S. central bank effort was aimed at sustaining waning economic growth after a record 10-year expansion that began March 1991. Later in 2001, the Fed sought to cushion the economic slide following the shock of Sept. 11 attacks that killed thousands, obliterated the World Trade Center in New York and damaged the Pentagon near Washington.

The blow to consumer confidence and spending from the attacks helped tip the economy deeper into a recession that has been dated from last March, but Greenspan indicated last week that the worst may be over.

``We are just at this particular point turning, as best I can judge,'' the influential Fed chief told the Senate Budget Committee in testimony that financial markets took as a signal that the rate-trimming spree was at an end.

But even if the meeting does not yield a rate cut, analysts think the Fed is likely to take the position that economic risks still lurk, saying in its post-meeting statement that that there is more chance of weakness than of inflation ahead and leaving the door open for more rate cuts if needed.

``I think the recovery is under way now. The question is how strong and long-lasting will it be,'' said economist Richard Berner of Morgan Stanley Dean Witter in New York. ``I think that we are going to start slowly but gather steam and that, to me, means that it will be lasting.''

If so, Fed policymakers will start to look toward the future, considering whether and when some of the sharp rate easing will have to be taken back, raising rates to fend off a possibility of dangerous price pressures.


Even if economic growth resumes in the current first quarter, as several Bush administration officials have suggested in recent days, rate rises are unlikely to show up imminently since the full impact of last year's downturn is still landing on the job market.

The unemployment rate hit 5.8 percent in December -- low by comparison with many European countries but still the highest U.S. rate in more than 6-1/2 years.

``A good rule of thumb is that the Fed isn't going to begin tightening (raising interest rates) until that unemployment rate starts to decline,'' said Zandi. ``We're still a good six months away from that and that means they'll likely start tightening again toward year-end.''

In the meantime, most recent indicators augur well for a return to economic growth in which national output of goods and services expands and living standards typically rise.

Significantly, consumer hopes brightened perceptibly in January, according to a report on Tuesday from the Conference Board, a New York-based research group. Its consumer confidence index jumped to 97.3 from a revised 94.6 in December.

That was a key finding in an economy driven two-thirds by consumer spending, and was coupled with a government report showing a pickup in activity on the industrial side.

The Commerce Department said durable goods orders climbed a stronger-than-expected 2 percent in December to $176.4 billion after a steep 6 percent drop in November.