Federal Reserve to unveil long-range U.S. rate forecast

The U.S. Federal Reserve will outline its long-range forecast for interest rates Wednesday — the first time it's ever been this specific about where it sees the country's borrowing costs heading.

This new, more explicit policy direction will be unveiled in the Fed's quarterly economic forecast at 2 p.m. ET.

Each member of the Fed's key policy-setting committee will reveal where they expect rates to be at the end of each of the next three years. Each member will also go on the record about when they think interest rates will begin to rise.

The Fed's move is meant to provide business and consumers with some assurance that rates are likely to remain low for some time to come. Some economic observers say the Fed is likely to signal that rates won't rise until 2014. Last year, the Fed indicated that it plans to keep rates low until mid-2013.

In addition to its rate forecast, the Fed is also expected to provide updated projections for unemployment, inflation and U.S. and global economic growth.

Those projections are likely to be a mixed bag. The U.S. economy, while showing some recent signs that it might finally be rebounding, it still shaky.

The unemployment rate fell in December to a three-year low, but it's still at 8.5 per cent. Debt levels remain high and home prices are only now beginning to rise after three years of steep declines. Europe's debt crisis will likely be a drag on global growth for much of 2012.

Federal Reserve chairman Ben Bernanke will hold a news conference at 2:30 p.m. ET to discuss the Fed's forecast.

Just before noon ET, the Fed will also announce its key overnight interest rate — the so-called "fed funds" rate. It's been at a rock-bottom zero to 0.25 per cent since December 2008, as the U.S. central bank kept borrowing costs at historic lows to try to lift the economy out of a brutal recession.

The widespread expectation among economists is that the Fed will again leave its key rate unchanged on Wednesday.

In the recent past, the Fed has embarked on a couple of rounds of aggressive bond buying. This strategy, known as quantitative easing, was designed to lower long-term rates.

Fed-watchers don't expect another round of bond purchases to be announced on Wednesday as the Fed will likely wait to see if the country's recent economic gains get more traction.