London, December 13:

The Federal Reserve dropped strong hints last night (DEC12) that it would keep interest rates on hold in the coming months as it remained cautious over possible inflationary risks in the US economy.

As it kept rates unchanged at 5.25 per cent, the central bank said core inflation remained high. Despite core inflation dropping from the decade high of 2.9 per cent in September to 2.7 per cent in October, it is still well above the level the Fed is comfortable with. Though the central bank said that inflationary pressures were likely to moderate over time — in part because of lower energy costs — it would continue to focus on inflation risks.

“The US economy may be slowing but growth in the rest of the world remains buoyant,’’ said Paul Ashworth, economist at Capital Economics. “It is that robustness that could prevent US inflation from falling this time.’’

The latest decision, which was widely expected by Wall Street analysts, marked the fourth consecutive meeting at which the Fed has kept rates on hold since June, when it raised rates for the 17th time in two years.

Though the Fed remains focused on inflation pressures, stock markets are still expecting a cut next year.