WASHINGTON — If the world’s investors are right, the Federal Reserve is about to take a bold new step to try to invigorate the U.S. economy.

And many expect the Fed to unleash its most potent weapon: a third round of bond purchases meant to ease long-term interest rates and spur borrowing and spending. It’s called “quantitative easing,” or QE.

Others foresee a more measured response when the Fed ends a two-day policy meeting Thursday. They think it will extend its timetable for any rise in record-low short-term rates beyond the current target of late 2014 at the earliest.

Fed officials began their discussions Wednesday and will end with an announcement of any decision around 12:30 p.m. Eastern time.

The stock market edged higher Wednesday, partly in anticipation of Fed action and after the highest court in Germany cleared the way for that country to contribute to Europe’s rescue fund to help indebted governments.

The Fed is facing pressure to act now because the U.S. economy is still growing too slowly to reduce high unemployment.

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In August, job growth slowed sharply. The unemployment rate did fall to 8.1 percent from 8.3 percent. But that was because many Americans stopped looking for work.

Chronic high unemployment was a theme Fed Chairman Ben Bernanke spotlighted in a speech to an economic conference in Jackson Hole, Wyo., last month. Bernanke argued QE and other unorthodox Fed actions had helped ease borrowing costs and boosted stock prices.

Higher stock prices increase Americans’ wealth and confidence and often lead individuals and businesses to spend more.

Bernanke cited research showing the two previous rounds of QE had created 2 million jobs and accelerated economic growth. Still, he said persistently weak hiring remains “a grave concern” that inflicts “enormous suffering.”

“He had a sense of urgency in that Jackson Hole speech,” said David Jones, chief economist at DMJ Advisors. “I think he is convinced that there is a need to do something.”

Some critics, inside and outside the Fed, remain opposed to further bond buying. They fear that by pumping so much cash into the financial system, the Fed is raising the risk of high inflation in the future.

Diane Swonk, chief economist at Mesirow Financial, doesn’t think the Fed wants to delay further support for the economy until after the election.

“This will be an effort on the part of Fed officials to pull out as much firepower as they can,” Swonk said. “They are trying for as much shock and awe as they can muster.”


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