PREVIEW-What the Fed will be considering at its meeting

* What: The U.S. Federal Reserve's Federal Open Market Committee meeting

* When: June 27-28; rate announcement around 2:15 p.m. (1815 GMT) on June 28

* Fed expected to leave federal funds rate unchanged at 5.25 percent; focus on statement

By Tamawa Kadoya

NEW YORK, June 26 (Reuters) - Financial markets expect the U.S. Federal Reserve to announce on Thursday it has kept benchmark borrowing costs unchanged for the eighth straight meeting, marking a full year since the last increase.

The Fed gathering comes as turmoil in the subprime mortgage market has raised concerns about the potential for broader spillover into financial markets and boosted new talk about a rate cut.

The economy, however, has appeared to be regaining vigor after an anemic first quarter, arguing for a steadier course. The Fed expects the economy to remain on solid ground, the labor market to remain tight and commodities prices to stay high. It is unlikely to abandon its vigilant stance even though it sees price gains moderating.

Fed officials will bring to the table forecasts for the central bank's semiannual report, which Chairman Ben Bernanke will present to Congress in late July.

Policy-makers will also renew a discussion on communications issues that has encompassed debate on setting a numerical inflation objective and providing more detailed economic forecasts.

A Reuters poll on June 6 showed all 18 primary dealers surveyed expected the Fed to hold steady this week, with 10 predicting its next move will be to cut rates.

If the Fed stands pat as expected on Thursday, it would be almost one year to the day since the central bank last raised rates. The June 29, 2006, rate hike was the last of 17 consecutive increases dating to June 2004, which took the overnight federal funds rate to its current 5.25 percent from 1 percent.

Following are some factors that Fed policy-makers are considering:

INFLATION

* Overall consumer price index was up 0.7 in May, but core prices rose just 0.1 percent. Core prices were up just 2.2 percent above their year-ago level, the smallest gain since March 2006.

* The Fed's favored inflation gauge, the price index for core personal consumption expenditures, showed a 2 percent year-on-year rise in April, the smallest in more than a year. Some Fed officials say they would like to see the index below 2 percent.

* Import prices in May rose 0.9 percent, the fourth straight monthly gain, on higher petroleum costs.