The U.S. Federal Reserve kept its key interest rate steady this week, but that doesn t mean it s resting on its laurels. On the contrary, a combination of subdued inflation, a stabilizing labor market and continued economic gains led Fed Chairman Ben Bernanke to end some of the Fed s emergency-liquidity programs. In particular, he indicated that the Fed would finish buying up mortgage-backed securities by the end of March, winding down a program that many economists credited with helping prevent a deeper recession.

Fed officials have begun debating how and when to change their language in their statements to the public to signal that rate increases are imminent. Analysts and investors alike are salivating over the opportunity to sift through Tuesday s Fed meeting minutes when they are released next month. They ll look for clues for when the Fed might raise its key short-term rate, which is the rate banks charge each other for overnight loans. Such a change, if done too soon, could undermine the recovery. However, if the Fed waits too long, inflation could become a problem.

Reading the Fed s minutes is a popular practice for debunking the Fed s moves, but some call parsing Fed commentary a waste of time. Here are two brokers opposing takes on the matter:

Who s Talking:
Liz Ann Sonders, Senior Vice President, Chief Investment Strategist, Charles Schwab & Co.

The Gist:
The Fed might have vowed to keep interest rates low for several months, but change is definitely on the way. The question is when.

Reiterating many of the same factors that Chairman Bernanke mentioned on Tuesday, Sonders doesn t think there is much pressure on the Fed to raise interest rates. She is, however, concerned about the Fed s move to unwind some of its emergency-rescue efforts. The previously noted ending of Fed support for mortgage-backed securities by the end of this month, combined with the loss of the housing-tax credit, which is set to expire in April, may threaten the nascent housing recovery, she says.

The reason? If the Fed's mortgage-buying binge ceases, mortgage rates could rise. That hasn't happened yet. Rates on 30-year mortgages have hovered around 5% despite knowledge that the program s end is nearing.

Still, Sonders doubts that if the housing recovery began to regress, the Fed wouldn t remain idle. We believe this is a key leg to the overall recovery and doubt that the Fed would let it deteriorate too far, or let money supply fall too far, before stepping back in, she says. For insight into what the Fed will do, Sonders advises that investors pay attention to changes in the Fed s terminology during the next several Fed meetings. Particularly, she suggests investors to keep an eye on the extended period phrase, which has been a popular word paring that the central bank has used to characterize how long rates will remain at current levels.

Despite this potential for future rate and program changes, economic data continues to improve -- if only slightly. Merger-and-acquisition activity is also up, while valuations remain reasonable. As a result, we remain relatively optimistic on the near-term prospects for the market, Sonders says.

Who s Talking:
Ethan S. Harris, Head of North American Economics, Bank of America Merrill Lynch Global Research

The Gist:
At some point, the Fed will have to switch from its extended period promise of keeping interest rates low to actually hikes rates. However, if recent history is a guide, investors will almost certainly misinterpret the Fed many times -- in spite of its searches for the perfect language.

To those attempting to decipher the Fed s exit strategy by watching officials wording, Harris says: good luck. Any word changes will surely be misinterpreted in the markets. After all, there isn t even any agreement about what the current language means, he says. According to some market observers, the extended period phrase means several more months. The Chicago Fed President Charles Evans says it means three or four more Federal Open Market Committee (FOMC) meetings, which translates to four to six months.

How then might investors avoid added confusion once the Fed does change its lingo?

For some guidance in the matter, Harris points to the last tightening cycle. At the end of June 2003, the Fed finished a period of monetary easing, cutting rates down to 1%. At the next meeting in August of that year, the FOMC committed to maintaining an accommodative policy for a considerable period. Then at the January 2004 meeting, the Fed shifted its terminology to being patient in removing its accommodative policy stance. Four months and two meetings later, it introduced the measured pace phrase to signal that a period of monetary tightening may begin, which did occur at the very next FOMC meeting in June 2004, when the funds rate target was lifted to 1.25%.

The current language has both a duration component -- the extended period --and a level of rates component -- exceptionally low, says Harris. No doubt someone at the Fed is pouring over a thesaurus looking for the perfect replacement. In the meantime, it s likely that no one, even at the Fed, knows exactly when the tightening will start, he says. But there s little doubt that the Fed s chosen exit tools will be fine tuned well in advance. We expect the FOMC to first change the duration statement by either dropping the word extended or substituting a softer word, Harris says.