The Federal Reserve on Wednesday offered a modestly brighter assessment of the economy's prospects and few clues on the path of monetary policy, as it reiterated that interest rates likely will not rise until at least late 2014.

The central bank described the economy as expanding moderately, just as it did in March, and said the unemployment rate had declined but remains elevated. In March, it had said the jobless rate had declined notably.

But its statement after a two-day meeting was slightly more upbeat than its March announcement.

Fed policymakers nodded to some signs of improvement in the housing sector and, while repeating that they expect moderate economic growth in coming quarters, said the recovery should then pick up gradually.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the committee expects to maintain a highly accommodative stance for monetary policy, the central bank's policy panel said. It repeated that officials expect to hold interest rates close to zero at least through late 2014 - a conditional pledge they have maintained since January.

Richmond Fed President Jeffrey Lacker again dissented against the decision, saying he believed rates would need to rise sooner.

Prices for government bonds turned negative after the little-changed statement, while stocks held gains and the dollar rose against the yen and the euro.

Everything is status quo so far as I can tell, said Bob Gelfond, chief executive of MQS Asset Management in New York. The Fed won't make any moves to tighten unless you see really strong numbers over several quarters and we're certainly not there yet.

Fed officials noted a pickup in inflation but said it was largely attributable to energy cost hikes that will affect price growth only temporarily.

EYES ON BERNANKE

As Fed officials gathered on Wednesday, the government reported that orders for long-lasting manufactured goods plunged 4.2 percent in March, the biggest drop since the economy was nose-diving in early 2009.

The data was the latest to suggest the economy lost momentum as the first quarter drew to a close.

Investors wishing for clues about how the central bank views the June end-date of Operation Twist, its latest effort to keep down long-term rates, were disappointed by the statement.

However, fresh Fed projections on the economy and interest rates due for release at 2 p.m. EDT (1800 GMT) and a news conference by Fed Chairman Ben Bernanke at 2:15 p.m. (1815 GMT) could offer more insight.

Bernanke is likely to be peppered with questions on the likelihood of a further easing of monetary policy. Most analysts think he will do whatever he can to keep his options open.

Economic growth has been just firm enough to weaken the case for additional stimulus through Fed purchases of government or mortgage bonds. Gross domestic product expanded at a 3 percent annual rate in the fourth quarter but is seen slowing to around a 2.5 percent pace in the first three months of this year.

Since the central bank's last round of GDP, unemployment and inflation forecasts in January, the jobless rate has come down to 8.2 percent from 8.5 percent, and the financial situation in Europe has stabilized somewhat, although it is still troubling.

In January, the Fed saw the economy growing between 2.2 percent and 2.7 percent. That range may be revised a bit higher. At the same time, the unemployment rate forecast will likely shift down from January's 8.2 percent to 8.5 percent range.

Policymakers will also offer individual projections for when the first interest rate increase should come and how quickly borrowing costs should rise - though these will appear on charts that do not link them to specific officials' names.

Traders are currently betting the Fed will begin raising rates in April 2014, with short-term futures contracts suggesting they see a 56 percent chance of a rate hike then.

In response to the deepest recession in generations, the Fed lowered benchmark overnight rates effectively to zero in December 2008 and more than tripled its balance sheet by purchasing some $2.3 trillion in government and mortgage bonds to keep long-term borrowing costs down.

According to a Reuters poll published last week, economists have dialed down expectations for a third round of bond purchases. The respondents saw a 30 percent chance of more bond buys, down from 33 percent in a poll in March.

A report early this month that showed job growth slowed sharply in March kept some hope of easing alive, and economists will look eagerly to the next round of jobs data on May 4 for more clues on where U.S. monetary policy may be heading.

(Editing by Andrea Ricci)

Ben Bernanke Federal reserve