Fed leaves US rates unchanged

The Federal Reserve, confronted with the perils of a slumping US economy and rising inflation, decided for a second month in a row to leave interest rates unchanged.

The Fed announced tonight that it was keeping its target for the federal funds rate, the interest that banks charge each other, at 2%.

The decision had been widely expected by financial markets.

The Fed is caught between what many economists believe is a recession and rising inflation pressures, triggered by this year’s huge hike in energy prices.

The Fed’s decision means that commercial banks’ prime lending rate, the benchmark for millions of consumer and business loans, will remain unchanged at 5%, its lowest level since late 2004.