The FOMC is not likely to change the target for the federal funds rate and the wording of the statement should be similar to the previous statement in October.

The Fed's statement includes a tightening bias, showing policy-makers' continued worries about inflation. Read text of Fed's Oct. 25 statement.

"The FOMC meeting on Dec. 12 is likely to be uneventful," said Michael Moran, chief economist at Daiwa Securities America Inc.

Speeches since the last Fed meeting show Fed officials more comfortable in their decision to pause its hiking campaign, according to Steve Stanley, chief economist at RBS Greenwich Capital.

"The Fed is firmly entrenched at a 5.25% funds rate target, and the odds of a move in either direction anytime soon are extremely low," he wrote in a research note.

The Fed has kept its target funds rate steady since late June.

In a speech last month, Fed Chairman Ben Bernanke suggested that the central bank hadn't been surprised by any of the economic developments since the summer. See full story.

Bernanke argued that "the economy will be fine, the housing spillover will be limited and that inflation is still a concern," Stanley said, with no signal of any change in Fed thinking.

Over the past six months, Bernanke and other Fed officials have stuck with the forecast that the economy was likely to moderate to a slow but steady growth rate, and that this slowdown was likely to reduce inflationary pressures. At the same time, the Fed has stressed that until there is evidence of lower inflation, it remains the key risk to the outlook.

Steve Ricchiuto, chief economist at ABN-Amro, said that the continued inflation bias is justified by underlying core PCE consumer inflation remaining above the Fed's comfort zone of 1% to 2% and the tight labor market.

One minor subplot will be whether Richmond Fed President Jeffrey Lacker dissents for the fourth-straight meeting in favor of higher rates to curb inflation.

Many economists who believe that the key risk ahead is a slowdown are questioning Lacker's position.

Lacker's dissents "are looking increasingly ridiculous," said Tim McGee, chief economist at U.S. Trust Corp.

Economists said that the Fed's sanguine view was bolstered by the November unemployment report released last Friday, which showed 132,000 payroll jobs were created.

The November jobs report "was a picture-perfect number for them to hold the funds rate steady and still come out and say they are concerned about inflation," said Stuart Hoffman, chief economist at PNC Financial.

Ed McKelvey, economist at Goldman Sachs, said that a case could be made for a substantive change in the statement -- to take account the various "straws in the wind" suggesting that a deterioration in the outlook for economic growth next year, but added that the Fed was unlikely to mention them.

A change in the wording was unlikely, according to McKelvey "Without much labor-market damage staring it in the face, we doubt the FOMC will do much more than tinker at the margins in the statement that follows Tuesday's meeting."

Economists said that any softening of the statement would only fuel expectations of easier monetary policy early next year. "If they were to do anything else, they would be throwing gasoline on a fire since the market is already so far ahead of them," agreed McGee of U.S. Trust.

The financial market is pricing in a Fed easing by June, and this fits with the general consensus of Wall Street economists.

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In a speech prepared for delivery at the New York Stock Exchange, Warsh said the U.S. economy has proven "remarkably resilient" in recent years and that he expects it to remain so in the period ahead.

Still, Warsh said, inflation remains a concern.

"Inflation, though down somewhat from its level earlier this year, remains uncomfortably elevated," he said in his prepared remarks.

"Financial market prices imply that inflation will continue its gradual but persistent downward track during the forecast period," Warsh continued.

"There remain, I believe, clear upside risks to that inflation outlook," he said.

Warsh's speech focused on the Fed's role in financial markets and market discipline.

Treasury prices turned slightly lower on Warsh's remarks.

The Federal Reserve will meet on Dec. 12 to consider whether to change interest rates. The Fed's current target for overnight lending between banks is 5.25%.

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Did the Fed signal that the next move would be to raise interest rates? Or to lower rates?

After voting to hold interest rates steady for a third straight meeting, the members of the Federal Open

Market Committee added this sentence to the short, post-meeting statement:

It's the kind of forward-looking language that Fed Chairman Ben Bernanke seeks to use to give the public a better idea about Fed policy. It's purposely conditional, based on a forecast that may or may not come true. See full story.

Those 12 words contain considerable ambiguity, if the reaction of economists is any judge.

One economist said the wording was delibrately vague.

"This is classic central bank bet-hedging: What is 'moderate'? Trend? A bit below trend? A bit above trend? Answer: It could be any of the above," said Ian Shepherdson, chief economist for High Frequency Economics. "In other words, the Fed has left its options open, which is exactly what should be expected at turning points in the economy."

Another economist said the sentence implies a long period of stable rates, accompanied by a gradual reduction of inflationary pressures.

"All of this indicates that the FOMC continues to have faith in its forecast of modest growth and stabilizing and then eventually receding core inflation," said Joshua Shapiro, chief economist for MFR.

Still another said it means further rate hikes could be coming.

"The question is: 'is moderate growth slow enough to restrain inflation?' said Joel Naroff, president of Naroff Economic Advisers. "Historically, it has usually taken a fairly sharp slowdown to ease price pressures. Moderate growth simply may not be enough."

Another economist said the message from the Fed was clear: No rate cuts and no recession.

"With those few words, the Fed has effectively thrown cold water on the notion that the next move will be lower rates," said Bernard Baumohl, executive director of the Economic Outlook Group. "With that additional sentence, though, the central bank actually went one step further. It acknowledged that there is absolutely no evidence to suggest the economy is about to suffer a hard landing or recession."

Still another said his colleagues were trying too hard.

"Clearly, these are minor tweaks and anyone looking for new signals in the wording of the statement is going to have to stretch things pretty far," said David Greenlaw, an economist for Morgan Stanley.

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