The U.S. Federal Reserve decided Tuesday to keep its benchmark interest rate unchanged once again as the economy is slowing.

It marked the fourth consecutive time that the central bank held the federal funds rate, the interest that commercial banks charge each other on overnight loans, steady at 5.25 percent, where it has stood since late June this year.

After boosting rates at its 17 regular policy-setting meetings in a row over two years, the Fed paused in August and left rates alone in September and October.

As a result of the decision, commercial banks' prime lending rate, the benchmark for millions of consumer and business loans, will remain at 8.25 percent, once again giving borrowers some breathing room. The prime rate responds to changes in the funds rate.

The decision came as the U.S. economy has been losing momentum.

In the July-to-September period, economic growth slowed to an annual pace of 2.2 percent, down from a 2.6 percent rate in the second quarter and a brisk 5.6 percent in the first three months.

The Fed believes that slower economic growth will eventually reduce inflation pressures.

But the Fed is fairly confident that the slumping housing and auto sectors will not drag the economy into recession.

"Economic growth has slowed over the course of the year, partly reflecting a substantial cooling of the housing market. Although recent indicators have been mixed, the economy seems likely to expand at a moderate pace on balance over coming quarters," said the Fed in a statement following Tuesday's regular meeting.

Readings on core inflation have been elevated, and the high level of resource utilization has the potential to sustain inflation pressures, the Fed said.

"However, inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations, and the cumulative effects of monetary policy actions and other factors restraining aggregate demand."

Economists think the Fed could stay on the sidelines through much of next year.

But Wall Street investors think the economy will slow too much and that the Fed will be forced to cut rates early next year.

However, Fed Chairman Ben Bernanke and other Fed policy-makers say that there is still a chance that rates could go up next year, if needed to thwart inflation. Bernanke has given no hint that the central bank would be lowering rates any time soon.

Policy-makers judge that "some inflation risks remain," said the Fed in the statement. "The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information."

An important inflation measure Bernanke said the Fed is keeping close watch is wages.

American workers' average hourly earnings rose to 16.94 dollars, a 0.2 percent rise from the prior month. Over the last 12 months, wages grew by a strong 4.1 percent, according to government data.

Before the Fed started to raise interest rates in June 2004, the funds rate stood at a 46-year low of 1 percent. The 17 consecutive times of rate hikes in two years marked the longest stretch of increases in Fed history.

The Fed's goal is to slow economy sufficiently to ward off inflation but not so much as to push the economy into recession.

The Fed holds eight regular meetings a year to set monetary policies. Policymakers attending the meetings include members of the Fed Board of Governors and Fed regional bank presidents.

The decision to maintain interest rates unchanged on Tuesday was supported by a 10-1 vote. Jeffrey Lacker, president of the Richmond Fed, dissented for the fourth straight time, arguing for another quarter-point rate hike to fight inflation, according to the statement.

Source: Xinhua