After digesting two days of testimony of Fed chief Ben Bernanke and the minutes of the Fed's June 29-30 meeting, analysts say "uncertainty" is the watch-word of the day.

Bernanke's testimony was straight down the middle between a pause and a rate hike in August. He tried to keep all options on the table. See full story.

Financial markets celebrated the possible pause on Wednesday, although the enthusiasm didn't last for more than a day. Read Market Snapshot.

"Certainly the Fed wants to pause. And it appears that the market wants the Fed to pause too," said Brian Westbury, chief economist at First Trust Advisors.

But Westbury said the Fed should raise its federal funds target rate to 6% before stopping.

Josh Shapiro, chief economist at MFR Inc., said "whether the FOMC pauses at its next meeting on Aug. 8 is a close call at the moment, with upcoming second-quarter [gross domestic product] and July employment data perhaps tipping the balance."

But Shapiro forecast the fed funds rate would peak at 6% in mid-2007.

Chris Rupkey, economist at Bank of Tokyo Mitsubishi, said all the talk of a Fed pause has obscured the fact that the Fed has an inflation bias.

"There is potential mistake here that the bond market is making. I think the odds are still pretty high that we are going to see fed funds rate at 5.5% either at the August or September meeting. They don't want to go every meeting any more. They want to slow down the pace as they get to 6%," Rupkey said.

In the summary of the FOMC's meeting, the committee members said they wanted to send the message to markets their policy actions at future meetings "was not foreordained." See full story.

Economists seem as divided on the outlook as the Fed policy-makers themselves.

David Rosenberg, North American Economist with Merrill Lynch, said the Fed will hold steady on Aug. 8 and may have already overshot.

On the other hand, Dean Maki, chief economist at Barclays Capital, said continued strong core inflation "will induce the Fed to tighten at the next few meetings" until rates reach 6%.

The majority of economists surveyed by MarketWatch predict the Fed will raise rates one more time this year, leaving the fed funds rate at 5.50% at the end of the year. See Economic Calendar.