Federal Reserve policymakers sit down on Wednesday to decide on what might be the last increase in interest rates for some time, but they will also discuss how to leave their options open in the statement that accompanies the move.

The Fed's policy-setting committee is expected to agree on raising the benchmark federal funds rate to 5.0 percent from 4.75 percent, which would be the 16th such move in a nearly two-year-long campaign to head off inflation risks.

Economists said the wording of their usual statement that follows the announcement will be critical for financial markets trying to navigate the murky outlook for Fed policy.

Many analysts believe the hint that some further policy firming may be needed will be dropped, opening the door to at least a pause at the next meeting in June to assess more data.

A Reuters poll of primary bond dealers found just over half believe the Fed will stop at 5.0 percent. The largest minority see a peak around 5.5 percent and two dealers see 6.0 percent.

The Federal Open Market Committee will announce its decision around 2.15 p.m. (1815 GMT) on Wednesday.

So, what will policymakers be considering at the meeting?

JOBS SOFTEN BUT SPENDING STILL STRONG

* U.S. employment growth slowed unexpectedly in April, with a modest 138,000 jobs created, although a jump in average hourly earnings raised some concerns about wage inflation.

* Oil prices remain stubbornly high at over $70 a barrel, lifting gasoline prices and potentially putting pressure on household spending by cutting into discretionary spending.

* Retailers reported stronger-than-expected sales in April as unusually warm weather boosted demand for clothing, and car sales were solid. The government's official retail sales report for April is due on Thursday, the day after the Fed meeting.

* Economists who were forecasting a slowdown in U.S. economic growth from the first quarter's 4.8 percent pace back to trend around 3.0 percent are having second thoughts after recent strong data.

* The giant U.S. services sector, which accounts for around 80 percent of economic activity, accelerated unexpectedly in April. The Institute for Supply Management's services index rose to 63.0 from 60.5 in March despite higher energy costs, and firms added to inventories in expectation of continued strong sales.

* Factories are also firing on all cylinders, with the Institute for Supply Management manufacturing index rising to 57.3 in April from 55.2 in March.

* Most indicators show the U.S. housing boom is losing momentum, though the data have been choppy. Housing starts dived 7.8 percent in March, but sales of new homes rose 13.8 percent, boosted by falling prices.

* The Fed's preferred measure of inflation, the core personal consumption expenditures index, rose an unexpectedly large 0.3 percent in March from February. That took the annual rate up to 2.0 percent in March, the top of the Fed's perceived comfort zone, from 1.8 percent in February.

WHAT THE FED HAS SAID

* Federal Reserve Chairman Ben Bernanke told Congress the Fed could well take a break from its string of rate increases, though it might resume tightening policy at a later date.

At some point in the future, the committee may decide to take no action at one or more meetings in the interest of allowing more time to receive information relevant to the outlook. Of course, a decision to take no action at a particular meeting does not preclude actions at subsequent meetings, Bernanke said on April 27.

Financial markets heard only the first part of that statement, with stocks and bonds rallying. Investors were then blindsided by remarks from CNBC reporter Maria Bartiromo on May 1 that Bernanke had told her at a journalists' dinner that markets had taken his remarks as too dovish.

Speeches from other FOMC members reveal a growing divergence of views. Some members have said they believe policy is approximately where it needs to be, while others including San Francisco Fed President Janet Yellen are worried about tightening too much.

I am increasingly concerned about the well-known long and variable lags in monetary policy -- specifically, that the delayed effects of our past actions might impact spending with greater force than expected, Yellen said on April 18.

Ben Bernanke Inflation