The US Federal Reserve has held interest rates steady while indicating slightly greater unease on inflation, but the central bank policymakers stopped well short of signalling that higher borrowing costs are imminent.
The Fed lowered its benchmark rate to 2% when it last met at the end of April. The Open Market Committee has suggested it hopes rate reductions totalling 3.25 percentage points since last September will be enough to help the economy rebound from the housing downturn and a credit crunch.
Fed officials have little room to manoeuvre. They are worried that steep increases in food and energy costs could begin to exert upward pressure on a wider range of prices. But at the same time – although they have shown no inclination to lower rates further – they are still concerned about the US economy’s weakness. Raising the cost of borrowing would curb inflation but stifle growth.
One analyst said: “Given the uncertainty about both upside and downside risks, the Fed is likely to keep interest rates on hold indefinitely.”