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Bernanke and other Fed officials have recently sounded less inclined to pursue further bond purchases. But private economists expect the Fed to keep another round as at least an option. They point to the cloudy state of the economy in light of Europe's debt crisis, a potential new spike in oil prices and still-high unemployment. "There is a lot of uncertainty out there," said Diane Swonk, chief economist at Mesirow Financial in Chicago. "Europe is in and out of a crisis, week by week. Oil prices look good now, but are they going to stay low?" On Friday, the government will issue its first estimate of economic growth for the January-March quarter. Many economists are predicting an annual growth rate of 2.5 percent
-- better than they had expected when the year began. But analysts are concerned that growth could weaken in the current quarter, reflecting payback from an unusually warm winter that boosted economic activity in the first quarter. The Fed's updated economic forecasts will be examined to see whether officials stick to their January assessments or have grown more upbeat about growth and hiring. A brighter Fed forecast would be seen as a sign that officials will be less likely to take further steps to support the economy for fear of causing high inflation. One Fed bond-buying program is still underway: a $400 billion program dubbed Operation Twist. Under this program, the Fed sells shorter-term securities and buys longer-term bonds, to try to push down long-term rates. That program is scheduled to end in June. Many economists think the Fed will let it end on schedule. If the Fed signals Wednesday that Operation Twist will end, it might disappoint investors, who could react by sending stock prices lower and bond yields higher. "I think markets have broadly discounted expectations that we will get any more Fed easing in the form of further bond purchases," said Mark Zandi, chief economist at Moody's Analytics. "But there are some investors who still have hope for further Fed actions, so an announcement of an end to Operation Twist will have a dampening effect on markets."
[Associated
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