By DPA,
Washington : The US Federal Reserve left interest rates unchanged Tuesday as it battles with the duelling concerns of inflation and sluggish growth in the US.
The US central bank kept its benchmark federal funds rate at 2 percent for the second straight meeting, warning that an ongoing credit crisis could further impact growth while high energy costs continued to spur inflation.
“Although downside risks to growth remain, the upside risks of inflation are also of significant concern,” the Federal Open Market Committee said in a statement.
The 9-1 decision – one of the board’s members preferred a rise in the benchmark rate – had been expected by economists. The freeze comes after a drastic series of rate cuts by a total of 3.25 percentage points over seven meetings from September to April.
The board said its already heavy easing of monetary policy would help boost growth in the world’s largest economy. Inflation was expected to moderate later in the year and into 2009, but that forecast was “highly uncertain”.
Gross domestic product increased by 1.9 percent in the second quarter of 2008, up from 0.9 percent in the first quarter and a 0.2- percent contraction in the last three months of 2007, according to a preliminary government estimate released last week.
Consumer prices jumped 5 percent in June compared to the same month in 2007, the government reported last month.