WASHINGTON: The United States Federal Reserve (Fed) is expected to shutter its bond-buying programme, closing one controversial chapter in its crisis response even as it struggles to manage a full return to normal monetary policy.

The Fed is likely to announce at the end of a two-day meeting that it will no longer add to its holdings of Treasury bonds and mortgage-backed securities, halting the final US$15 billion (RM49 billion) in monthly purchases under a programme that at its peak pumped US$85 billion a month into the financial system.

An important symbolic step, the end of the purchases still leaves the Fed far from a normal posture.

Its balance sheet has swollen to more than US$4 trillion, interest rates remain at zero, and, if anything, recent events have increased the risk the US central bank may need to keep propping up the economy for longer than had been expected a few weeks ago.

The statement the Fed will issue at 2pm (1800 GMT) will be read carefully for signs of how weak inflation, ebbing global growth and recent financial market volatility have influenced US policymakers.

"They are worried about the economy, the global one, and are likely to leave much of their language intact rather than signal progress towards a rate hike," wrote Morgan Stanley analyst Vincent Reinhart.

Attention will focus on whether the Fed's statement continues to refer to "significant" slack in the US labour market, and whether it retains language indicating rates will remain low for a "considerable time," as most economists expect.

Paul Edelstein, director of financial economics at IHS Global Insight, said the Fed may need to acknowledge the inflation outlook is weakening.

"They have been kind of wrong about inflation," Edelstein said.

"It would behoove them to do something - signal to markets they are not going to tolerate inflation and inflation expectations persistently below two per cent." Reuters