Interest rates in US held despite inflation fears

The Federal Reserve has brushed off concerns that soaring oil prices will trigger a rise in long-term inflation in the world's largest economy, promising to keep US interest rates at rock-bottom levels well into 2014.

The US central bank stuck by its exceptionally loose monetary policy despite signs of economic revival and progress tackling the European debt crisis.

Official interest rates have in effect been set at zero since December 2008, and the Fed has been pursuing bond purchases to hold down the market rates that business and consumer borrowers pay.

"The recent increase in oil and gasoline prices will push up inflation temporarily," the Fed's rate-setting committee said last night, "but the committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate" to promote price stability and full employment.

Economic growth accelerated to an annualised rate of 3.0 per cent in the final three months of last year, and US unemployment has fallen further in the early months of 2012 to 8.3 per cent. The improved global economy and tension in the Middle East has pushed oil prices to their highest levels since 2009.