WASHINGTON DC, United States?The Federal Reserve's rate-setting panel will meet Tuesday amid pressure to resume crisis-era spending to restart a stalled recovery.

The 10-member body is expected to keep interest rates at historic lows, but Fed watchers will be looking for any hint of a return to stimulus spending.

After planning to reel in crisis measures, the Labor Department reported US economy shed 131,000 jobs in July, thrusting the Fed's policies back into the spotlight.

The bank battled the financial crisis by spending more than one trillion dollars, buying up Treasury bonds, mortgage-backed securities, and other financial instruments to lubricate markets.

Ahead of the Federal Open Market Committee meeting, speculation is rife that members could start re-buying assets scheduled to fall off the books.

"The FOMC meets next Tuesday and the members may decide to do something to show they are taking action," said Joel Naroff of Naroff Economic Advisors, "that may sound good but the Fed is largely out of bullets."

But with political opposition all but ruling out another round of government stimulus, the Fed may be forced to use what little it has left.

Fed chairman Ben Bernanke and St. Louis Fed president James Bullard have both hinted that the central bank could act.

"We are going to continue to monitor the economy closely and continue to evaluate the alternatives that we have," Bernanke said.

According to Standard Chartered analyst John Calverley the Fed could resume buying treasury bonds, but is more likely to dip its toe in the water first.

"The Federal Reserve may take a tiny step in this direction at next week's FOMC meeting by reinvesting the proceeds of maturing bonds rather than allowing the portfolio to shrink."

Analysts say that could mean spending anywhere between $100-300 billion over the next year.

But the move would not be without risk for the plight of the dollar, bond markets, and stock holders.

The move could also have broad repercussions for investor confidence according to Stephen Stanley of Pierpont Securities.

"Such a move would clearly be a shift in the Fed's policy stance brought on by fears that the economy is rolling over," he said, adding the move may not even tackle what ails the economy.

In recent months, companies particularly the financial firms have increased saving and cash levels, staving off hiring.

At the same time consumer demand shows few signs of resurgence.

"Adding liquidity to an already saturated financial system will do nothing to spur activity," said Stanley.

Any large-scale move could also put pressure on the US currency, which has lost ground of late against the euro.

"The printing of trillions of dollars to purchase government debt will put serious pressure on the value of the dollar," warned Peter Schiff, president of Euro Pacific Capital.

But a decision by the Fed not to act could also have major repercussions amid worries of a double-dip recession.

Standard Chartered estimates that around 60 percent of US growth since the depth of the crisis came thanks to companies rebuilding inventories, a process that has come to a grinding halt.

Investors may also be shocked if the Fed does not act, sending stock indexes into a short-term spin.

"Markets have begun pricing in a small probability of some kind of Fed action by year-end," said Joseph Abate of Barclays Capital.