The Federal Open Market Committee (FOMC), which is made up of the Federal Reserve Board of Governors and the Reserve bank presidents, voted again today to hold its target interest rate at two percent, with unanimous member support for the hold over. The financial community was looking for a rate cut when the committee convened this afternoon, especially after the recent bailout of mortgage financing giants Fannie Mae and Freddie Mac and the news yesterday of Lehman Brothers' bankruptcy and the fire sale of Merrill Lynch & Co.

Federal Reserve policy makers acknowledged that strains in the financial markets, tighter credit conditions, and the ongoing housing contraction have weighed heavy on the nation's economy – a trend that is expected to continue “over the next few quarters,” the FOMC said in a press statement. “Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth,” the committee said.

The committee said it expects inflation to moderate later this year and next year, although it warned, the inflation outlook remains highly uncertain. “The downside risks to growth and the upside risks to inflation are both of significant concern to the Committee. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability,” FOMC promised.