WASHINGTON (AFP) - The US Federal Reserve is likely to hold interest rates near zero Wednesday to bolster a fragile recovery from recession as rising unemployment threatens to stall growth, analysts say.

The policysetting Federal Open Market Committee (FOMC), headed by Fed chairman Ben Bernanke, winds up a two-day meeting that is widely expected to leave monetary policy exceptionally loose to boost credit flows, the lifeblood of the world's largest economy.

"Although the economy continues to show signs of incremental growth, it seems premature for the Fed to lay out a timetable for action with unemployment continuing to climb," said Frederic Dickson at DA Davidson & Co.

Most analysts expect the central bank to keep unchanged its underlying federal funds interest rate target at zero percent to 0.25 percent, where it has been since last December to help kick-start the economy out of the worst downturn since the Great Depression.

The economy grew for the first time in a year in the third quarter, at a 3.5 percent annual rate, largely the result of government stimulus spending, official data showed last week.

Economists and traders will parse the accompanying FOMC statement for clues to the direction of monetary policy.

The FOMC was expected to announce its rate decision around 2:15 pm (1915 GMT).

Bernanke recently signaled there was no hurry to tighten monetary policy, saying action would be taken "when the economic outlook has improved sufficiently."

Earlier, a survey showed the pace of job losses in the US private sector declined in October for the seventh consecutive month.

Payrolls firm ADP reported the sector shed 203,000 jobs last month, in line with market expectations, but "still very depressing," said Briefing.com analysts in a client note. Text of the Federal Reserve statement

For unemployment to decline, they said, payrolls need to increase by slightly more than 100,000 a month.

"Over the last two recessions we've seen 'jobless' recoveries where the peak unemployment comes well after the overall turnaround in the US economy. We don't expect the unemployment rate to peak until sometime in the second half of 2010," the analysts said.

The government is to report Friday October labor market data, expected to show the unemployment rate rising to 9.9 percent from a 26-year high of 9.8 percent in September.

Ian Shepherson, chief US economist at High Frequency Economics, said that Bernanke, an expert on the Great Depression, was virtually certain to steer a steady course while the economy is still in an extremely fragile state.

"If you learn one thing as a student of depressions, it is that premature tightening is the kiss of death," he said.

Boris Schlossberg at Global Forex Trading said that markets will closley scrutinize the central bank communique.

"The critical focus will be on the following phrase, 'keeping rates exceptionally low for an extended period,'" he said.

"Some analysts have predicted that the Fed will remove the word 'extended,' signaling to the market that it is laying the groundwork for possible normalization of monetary policy in 2010."

But he noted that the Fed has never raised rates until the unemployment rate has peaked and "therefore remains constrained in its policy options by the difficult labor conditions extant in the US economy."

The Fed often waits at least several months after unemployment -- a lagging indicator of recovery -- peaks before beginning to raise rates.