The Fed's decision to leave unchanged the key interest rate, which commercial banks charge each other on overnight loans, was in line with economists' expectations.

Many economists now predict that the Fed will hold the bank lending rate, also known as federal funds rate, in this low level for the rest of this year and for most -- if not all -- of next year.

In its statement, the Fed also said it "anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period."

Like many private economists, the Fed at present does not expect inflation to become a problem. "In light of increasing economic slack here and abroad," it said, "inflation will remain subdued."

Pushed by higher energy prices and apparel costs, consumer prices in the United States jumped 0.4 percent in February, the biggest monthly gain since last July, according to the Labor Department on Wednesday.

The 0.4 percent gain followed an increase of 0.3 percent in January and was slightly bigger than the 0.3 percent gain that analysts had been expecting.

Even so, few economists believe inflation will become a problem before the economy gets out of the recession, which is in its second year.

Some economists, however, said that it's mindful of the risks of pumping more money into the economy, bailout financial institutions and leaving the key rate at a record low for too long.

Those steps could ignite inflation, put taxpayers' money in danger and encourage companies to make high-stake gambles, they warned.

Against this backdrop, the Fed pledged in the statement it will "continue to carefully monitor the size and composition of the Federal Reserve's balance sheet in light of evolving financial and economic development."

Wednesday's decision and announcement came three days after Fed Chairman Ben Bernanke reaffirmed that stabilizing the nation's financial system is key to turn around the economy.

It that can be done, then the recession might end this year, setting the stage for a recovery next year, he said in a rare interview televised by CBS.

Even in this best-case scenario, however, US unemployment rate, which is now at a 25-year peak of 8.1 percent, will keep climbing. Some economists think it will hit 10 percent by the end of this year.

And the US economy, the world's largest one, is still sinking. In the fourth quarter of 2008, it contracted at an annual rate of 6.2 percent, the worst showing in a quarter century.

Economists expect the economy to continue contracting in the first half of this year, predicting a pace between 5.5 and 6 percent or more for the first three months.

(Xinhua News Agency March 19, 2009)