Lost in the market mayhem, the Fed was meeting . . .

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With Wall Street preoccupied Tuesday with Europe’s spreading debt woes and the Goldman Sachs circus on Capitol Hill, the Federal Reserve‘s two-day meeting couldn’t provide much competition for investors’ attention.

Just as well, because the central bank’s post-meeting statement, due at about 11:15 a.m. PDT on Wednesday, isn’t expected to diverge all that much from the statement that followed the Fed’s last meeting, on March 16.

Most importantly, Chairman Ben S. Bernanke and peers are expected to retain their wording that short-term interest rates will likely stay at ‘exceptionally low levels . . . for an extended period.’

Steven Ricchiuto, chief economist at Mizuho Securities USA, says recent comments by key Fed officials ‘suggest that the [Fed] is not in a rush to change its accommodative stance and feels that the extended-period language reflects its central tendency for policy.’

Besides, though some on Wall Street have come to believe that ‘extended period’ means at least another six months, it could end up meaning whatever the Fed chooses it to mean.

Millions of savers no doubt would argue that it’s past time for a boost in short-term rates from near-zero levels. But with unemployment still extraordinarily high, the central bank would risk a political firestorm by suggesting that it’s time to test whether the economy could cope with higher rates.

‘From a labor market perspective, the case for dropping ‘exceptionally low ... for an extended period’ is weak to the point of non-existence,’ said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

Meanwhile, the debt mess in Europe serves as a reminder to policymakers that the financial system remains fragile. The last thing the Fed needs is another credit crisis. The path of least resistance is to keep the markets happy with cheap money, while nodding dutifully to the need for long-term fiscal discipline.

Even as policymakers keep their low-rate pledge, they’re expected to tweak their statement to acknowledge that the sustainability of the economic recovery seems to have improved in recent months.

‘The recovery is likely to be seen as broadening out geographically as well as among industry groups,’ Ricchiuto said.

-- Tom Petruno