The US Federal Reserve kept interest rates steady last night but warned that the economy was slowing so fast that there was a risk of a sharp downturn. This was seen as a signal the central bank was preparing to cut rates soon.
The statement issued by the Federal Open Market Committee at the conclusion of its eighth and final session this year represented a sharp shift from its 11-month-old position that inflation was the greatest risk the record US expansion faced.
"The drag on demand and profits from rising energy costs, as well as eroding consumer confidence, reports of substantial shortfalls in sales and earnings, and stress in some segments of the financial markets suggest that economic growth may be slowing further," the FOMC said in its post-meeting statement.
The Fed kept its federal funds overnight bank lending rate at 6.5%, where it has been since a half-percentage point increase in May.
