THE Federal Reserve last night left its key interest rate unchanged, bringing an end to a string of consecutive rate cuts aimed at keeping the United States out of a deep recession.
The US central bank announced that it was keeping the federal funds rate, the interest rate that banks charge each other, at 2 per cent.
It was the first time in ten months that the Fed has failed to reduce interest rates at its regular meeting.
The decision was widely predicted as the central bank is confronted with the twin perils of a possible American recession and rising inflation pressures, stemming from this year's surge in oil and food prices.
In a brief statement explaining the decision, Fed chairman Ben Bernanke and his colleagues cited both the threats to growth and rising inflation pressures as problems confronting the US economy at the moment.
The statement said that the downside risks to growth "appear to have diminished somewhat" but added that "the upside risks to inflation and inflation expectations have increased".
The Fed action was approved on a 9-1 vote with Richard Fisher, president of the Fed's regional bank in Dallas, casting a dissenting vote.
Fisher preferred an immediate increase in interest rates to fight inflation.
Short-term borrowing costs on millions of consumer and business loans tied to US banks' prime lending rate will now remain unchanged.
The prime rate is currently at 5 per cent, its lowest level since late 2004.
The full article contains 252 words and appears in The Scotsman newspaper.
