BLUE chip stocks bounded higher yesterday as the Federal Reserve's decision to keep interest rates unchanged removed a possible roadblock to the market's continued rally.

The Dow Jones industrial average closed up 21.82 points at 5,721.26, putting the blue chip index within a stone's throw of its record closing high of 5,778.00 set on May 22nd.

In the broader market, advancing issues led declines 1 30 to 1,068 on moderate volume of 334 million shares on the New York Stock Exchange.

The Fed had been expected to hold interest rates steady amid signs the economy was slowing after strong second quarter growth without inflation heating up.

The Standard & Poor's composite index of 500 stocks fell 0.89 to 665.69. The American Stock Exchange index rose 1.69 to 559.29.

The NYSE Composite index of all listed common stocks fell 0.03 to 356.61. The average share was unchanged.