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Federal Reserve hints may act on US economy

The US central bank has decided to not take further action to rejuvenate the country's economy for now - but hinted it may do more later if needed.

The Federal Reserve kept interest rates steady and made no change to monetary policy after its one-day meeting.

But it expressed greater concern than previously about the sluggish pace of economic growth and low inflation.

The economy - with unemployment close to 10% - is set to dominate November's mid-term elections.

The US recession ended in June 2009, but recovery has lost momentum this year with growth at an annualised rate of 1.6% in the second three months of 2010.

The Fed cut key interest rates to near zero in December 2008 and later put money into the economy by buying $1.7 trillion in US government debt and mortgage bonds.

While not announcing new purchases of government debt or other specific measures, it did leave the door open for such steps to be taken in future.

In a statement, the Fed said it would "continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate".

Observers said this was a sign it was more open to the prospect of pumping further money into the economy than in August, when the Fed had simply said it would "employ its policy tools as necessary".

"The Federal Reserve has taken another step, albeit a half step, in recognizing the unusually sluggish economic and employment outlook and related need for additional policy measures," said Mohamed El-Erian, co-chief investment officer at bond fund PIMCO.

BBC News

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