The US central bank has left interest rates on hold, amid concerns over falling consumer confidence, and plunging share values.

The Federal Reserve, the US central bank, retained rates at 1.75%, their lowest for 40 years.

The Fed cited continuing concerns over the pace of US economic recovery in a statement announcing the decision.

"The committee expects the rate of increase of final demand to pick up over coming quarters... but the degree of the strengthening remains uncertain," the statement said.

Setbacks

The move had been widely expected by economists, as the US economic revival has failed to live up to bullish forecasts made at the start of the year.

"[This is] probably among the least surprising of Fed statements," said Tim O'Neill, chief economist at Bank of Montreal in Toronto.

Consumer confidence last month dropped at its fastest rate since after the 11 September attacks, while unemployment has risen sharply to more than 6% over the last six months.

Meanwhile the main US stock index, the Dow Jones industrial average, has shed 10% over the last month, while the dollar fell earlier on Wednesday to approach parity with the euro.

Long term hold?

Economists also said that imminent rises in rates were unlikely, with the Fed saying on Thursday that economic risks were finely balanced between overall weakness and inflationary growth.

"There is a hint that they do not see any reason to tighten in the near term," said Alan Ruskin, research director at 4Cast in New York.

"They are moderating the perception of an [economic] upside and moderating expectations of a Fed tightening further out as well."

Rates have been kept on hold since December, following 11 cuts last year as the Fed attempted to stave off fallout from the global economic slowdown.

Most economists do not now see rates rising again until November, with many forecasting that rates would remain at 1.75% throughout 2002, a poll for news agency Reuters showed.