The Federal Reserve on Wednesday looks set to launch a fresh effort to invigorate the faltering economic recovery, embarking on what could be the first in a series of incremental steps to foster stronger growth.

The central bank appears likely to try to push long-term borrowing costs lower by rebalancing its $2.8 trillion portfolio of bond holdings to weight it more heavily to longer-term securities.

Such a move would fly in the face of Republican objections to Fed activism.

Top Republican congressional leaders wrote to Fed Chairman Ben Bernanke this week urging the central bank to desist from further economic interventions, echoing criticism voiced by Republican presidential candidates in recent weeks.

Fed officials, however, believe that by shifting their bond holdings they could encourage mortgage refinancing and push investors into riskier assets, such as corporate bonds and stocks, without stoking a run-up in consumer prices.

Members of the Fed's policy-setting committee are expected to announce their decision at about 2:15 p.m. at the conclusion of a two-day meeting. Policy makers resumed work on Wednesday at around 9 a.m., a Fed official said.

Faced with a lofty 9.1 percent unemployment rate, consumer and business confidence sapped by a troubling U.S. credit downgrade, and an escalating sovereign debt crisis in Europe, Fed officials have signaled they would seek to prevent already sluggish U.S. growth from weakening further.

The U.S. central bank is not alone in its concerns. The Bank of England on Wednesday signaled it was ready to pump more money into the weakening British economy, potentially as soon as October.

Similarly, the Norwegian central bank held its main interest rate unchanged and signaled it might refrain from rate increases for longer than previously expected due to a weaker global economy and the euro zone debt crisis.

The U.S. economy grew at less than a 1 percent annual rate over the first half of the year and analysts have warned of a heightened risk of recession.

The U.S. recovery has now demonstrated a renewed loss of momentum, one now joined by a more pronounced slowdown globally, TD Securities economist Eric Green said. In this environment the Fed will remain in crisis management mode.

BROOKING DISSENT

The International Monetary Fund warned on Tuesday that the United States could fall back into recession if the government tightened its budget too quickly. It recommended the Fed consider a further easing of monetary policy as long as there was no sign an inflationary psychology taking root.

The Fed has already embarked far down one of the most aggressive monetary easing paths on record. It cut overnight interest rates to near zero in December 2008 and then moved to more than triple its balance sheet to $2.8 trillion through a series of bond purchases.

After its last meeting on August 9, the Fed said it expected to hold rates at rock-bottom levels at least through the middle of 2013, a decision that drew three dissenting votes.

Critics claim the easing campaign has failed to produce results and warn it could actually cause damage.

We have serious concerns that further intervention by the Federal Reserve could exacerbate current problems or further harm the U.S. economy, Republican congressional leaders wrote in the letter to Bernanke, which they released on Tuesday.

The central bank's policies have become a topic on the presidential campaign trail as well.

Texas Governor Rick Perry, a leading Republican candidate, said any further Fed money printing would be almost treacherous, treasonous, and his principal GOP rival, former Massachusetts Governor Mitt Romney, said he would replace Bernanke, a Republican first appointed by President George W. Bush.

LET ME EXPLAIN

Political pressure is unlikely to deter the Fed from acting, but it could make the central bank boost efforts to explain its policies and justify its actions.

Analysts say that with the economy still expanding, and with inflation not far from the central bank's preferred levels, the Fed will likely take only a small step on Wednesday.

Financial markets widely expect the Fed to rebalance its portfolio in a program sometimes referred to as Operation Twist after a like-named Cold War era monetary maneuver.

Analysts anticipate the Fed could buy between $300 billion and $400 billion of longer-term assets over a six month period. Purchase would focus on the 5 year to 15 year range rather than the two year to 10 year duration that was favored previously.

One unknown is whether the Fed will opt to actively sell short-term assets and replace them with longer-dated securities, or whether it will simply replace maturing securities.

Markets also think the Fed may cut the interest rate it pays banks for excess reserves held on deposit at the central bank, a move that might push banks to make loans rather than let the funds languish.

In addition, many observers expect the Fed to give serious thought to more clearly defining what levels of unemployment or inflation might prompt it to begin to tighten financial conditions -- although deliberations on that subject are unlikely to lead to a quick decision.

By making its intentions crystal clear, the Fed could underscore the prospect of easy money until economic conditions improve convincingly.

George W. Bush Ben Bernanke International Monetary Fund