Leaving US interest rates unchanged last night the Federal Reserve took note of recent turbulence in financial markets , but said it believed the economy was sound.
The Fed said that while tightening credit conditions had increased downside risks facing the economy, inflation was still its main concern.
Analysts had widely predicted the US Federal Reserve would leave rates at 5.25% last night for a 13th month.
'Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing,' it said.
'Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters, supported by solid growth in employment and incomes and a robust global economy,' the Fed said.
Policy-makers met against a backdrop of volatile financial markets and rising default rates in the US subprime mortgage market that had led some financial market participants to clamour for a reduction in borrowing costs.
Even after a big rebound on Monday and further small gains on the back of the Fed's announcement, global stocks indexes are well below highs notched in mid-July, and investors have lost their appetite for riskier debt.
The Fed said that while inflation outside volatile food and energy costs has improved modestly in recent months, it is not yet convinced that inflation is completely tamed.
As it had at its last meeting in June, the central bank warned that a tight labour market could push inflation higher.
