WASHINGTON, Aug 7: The Federal Reserve announced Tuesday in a widely expected decision that it was keeping US interest rates unchanged at 5.25 per cent. The central bank has held its short-term fed funds rate at 5.25 per cent since June of 2006 in a bid to ward off inflationary threats.

The Fed’s policymakers opted to hold interest rates steady despite mounting concerns about the distressed housing and mortgage markets and a related credit squeeze.

The Fed acknowledged such problems in a policy statement explaining its latest rate decision.

“Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing,” the Fed said.

Some economists say such economic pressures will likely persuade the Fed to cut rates before the end of the year.

The Fed’s policymakers, however, signalled that inflation pressures remain their highest concern.

“Although the downside risks to growth have increased somewhat, the committee’s predominant policy concern remains the risk that inflation will fail to moderate as expected,” the central bank said.—AFP