US Federal Reserve policymakers held interest rates at 1961 lows today, contending that uncertainties caused by a pending Iraqi war were so extreme they could not gauge the economy's prospects.
In a new and unusual turn of phrase that left markets puzzled, US central bank policymakers pledged "heightened surveillance," implying they were ready to lower rates if necessary.
They next meet May 6th but could act earlier if the war goes badly for the United States or the economy unravels.
The Federal Open Market Committee's 12-0 decision left the central bank's trend-setting federal funds rate target for overnight loans between banks at 1.25 per cent, where it has been at since a hefty cut last November.
The Fed blamed a hesitant economic recovery on "oil price premiums and other aspects of geopolitical uncertainties," and said it still believed low interest rates and strong productivity would help the economy eventually, echoing Fed chief Mr Alan Greenspan's publicly stated conviction.
With a war days - or potentially even hours - away, the Fed said it did "not believe it can usefully characterize the current balance of risks" between a fresh bout of economic weakness and a pickup in prices.
The Fed's decision to hold fire on rates was expected but the imprecise wording of the statement caught financial markets off guard. Merrill Lynch chief economist Mr David Rosenberg called the statement "somewhat perplexing."
The Fed said it would withhold any determination on the threats facing the economy until after some of the "unusually large uncertainties" abate.