Fed keeps key lending rates unchanged

WASHINGTON, Sept. 16 (UPI) -- The Federal Open Market Committee kept the U.S. central bank's key funds rate unchanged in spite of pressure to add liquidity to struggling financial markets.

Noting the bank would "act as needed," the fund rate would remain at 2 percent for the time being, the U.S. Federal Reserve said in an explanatory statement.

Financial turmoil forced regulators to seize control of the nation's largest mortgage brokers, the Federal Home Loan Mortgage Corp. and the Federal National Mortgage Association, a week ago. Markets were rocked Monday by the demise of Lehman Brothers Holdings, Inc., which filed for Chapter 11 bankruptcy protection and Bank of America's rescue of Merrill Lynch.

The Fed noted, "strains in financial markets have increased significantly and labor markets have weakened further." The Fed, however, steered away from cutting rates as it did in September 2001 to restore calm in financial markets.

The Dow Jones industrial average lost 504 points Monday, its worst one-day slide since Sept. 17, the first day of trading after the Sept. 11 terrorists attacks.