The Federal Reserve opted for a wait-and-see approach on US interest rates last night by keeping them at four-decade lows and expressed hopes the recovery will pick up once Iraq war fears lift.
"Oil price premiums and other aspects of geopolitical risks have reportedly fostered continued restraint on spending and hiring by businesses," the US central bank's policy-setting Federal Open Market Committee (FOMC) said after a two-day meeting.
The FOMC unanimously voted to keep the federal funds rate for overnight loans between banks at 1.25 per cent. This was the level reached last November when the Fed dropped rates a half per centage point, a 12th-rate reduction since January 2001.
Policymakers said the current muted pace of economic activity should perk up once some of the concern about geopolitical risks fades, especially with interest rates as low by historical standards as they now are.
The Fed decision met expectations and helped soothe edgy financial markets. The Dow Jones industrial average rose 21.87 points, or 0.27 per cent; the Nasdaq added 15.88 points, or 1.18 per cent, to finish at 1,358.06.
FOMC members said risks to the economy remained evenly balanced between higher prices and a renewed downturn, a stance also adopted in November.
Still, analysts said it appeared the Fed feels it has done all it needs to do for now and that it was unlikely to lower rates again unless it was to offset some shock to the economy.
The US economy last year began a crawl back from a contraction in the first nine months of 2001. But economists have dubbed the recovery "jobless" for its resemblance to the period after the 1990-91 recession when growth came without new job creation.