Fed holds interest rate steady

A cautious US Federal Reserve has left its key interest rate unchanged at two percent as it wrestles with the conflicting threats of a potential recession and rising inflation.   ┬á The Fed's rate setting committee explained that economic growth was likely to remain weak for some time while the outlook for inflation was "uncertain". Consumer prices rose at their fastest monthly rate in eleven years in June, but oil and other commodity prices are now falling. ┬á┬á Committee members voted ten to one to hold the rate at two percent, with Richard Fisher casting the only dissenting vote, in favor of an increase.┬á┬á The Fed cut rates aggressively in late 2007, but has left them unchanged since April this year. Economists agree that the continued slump in the housing market and its impact on consumer confidence makes any imminent rate rise unlikely.┬á┬á "Tight credit conditions, the ongoing housing contraction and elevated energy prices are likely to weigh on economic growth over the next few quarters," the Fed said in a statement.┬á┬á Statistics published Tuesday showed that the services sector contracted again in June but not by as much as experts had forecast. Second-quarter gross domestic product (GDP) growth was stronger-than-expected at 1.9 percent on an annual basis, propped up by the governmentÔÇÖs stimulus package. ┬á┬á Consumer spending is weak, however, rising only 0.2 percent in June, while unemployment has risen to a four-year high.  ┬á┬á┬á┬á*┬á┬á┬á┬á┬á┬á┬á┬á┬á *┬á┬á┬á┬á┬á┬á┬á┬á┬á *