Federal Reserve Chairman Ben Bernanke may have declared the recession all but over. But he and 11 other fed officials meeting this week still have work to do in helping to loosen tight credit markets that threaten economic recovery.

In their meeting Tuesday and Wednesday, Federal Open Market Committee members will examine whether to leave interest rates at near-zero levels. It is largely believed that they will do just that in an effort to get credit flowing more freely. Fed officials are expected to release a statement at about 2:15 p.m. ET on Wednesday.
"They would be absolutely delighted if banks went out and raised a lot more private capital and then began to lend more," former Fed Governor Lyle Gramley told Bloomberg News. "Until that happens, the Fed has to continue to try to encourage economic growth through easy money."

Fed officials are in a tight position when it comes to interest rates. Increasing them too soon could stall the fledgling recovery, while leaving rates at near-zero could spark inflation. Analysts, however, say that with the economy in its weakened state and consumer confidence low, the risk of inflation remains mostly muted.

"This will be one the quietest Fed meetings in quite some time," analyst Rich Yamarone told CNNMoney.com. "The last thing they want to do at this stage of the game is to upset the apple cart. They're liking what they're seeing in some of the economic data, so it's just steady as she goes," said Yamarone, director of economic research at Argus Research.

Still, Fed officials have a bevy of distressing economic data to address. In addition to low consumer confidence, which is keeping a lid on retail sales, manufacturing levels also remain low. Though data showed manufacturing expanded last month for the first time in 18 months, employment in the nation's factories continued to fall, for the 13th consecutive month. The housing market, while seeing more sales and building activity in recent months, is still recovering from historic lows.

The latest Fed meeting comes as Congress weighs whether to rein in the central bank's powers. Viewed by some lawmakers as ineffective in dealing with the recent financial crisis, Senate Banking Committee Chairman Christopher Dodd is pushing a proposal that would merge federal oversight of the nation's financial system under a single regulator.

The proposal differs from one put forth by President Obama, who would like to give the Fed power to determine whether banks and other financial institutions have grown so big as to threaten the vitality of the U.S. economy should they fail. The President, however, wants to strip the Fed of its role in protecting consumers and create a separate watchdog agency to enforce new rules on lending and credit cards.

Dodd (D-Conn.) supports the latter provision, although he differs from the president in other proposals. On the House side, Rep. Barney Frank (D.-Mass.) is likely to propose a reform bill more akin to that of Obama's.

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