The US Federal Reserve is set to keep its key interest rate unchanged at 2% as it grapples with the twin dangers of possible recession and high inflation.
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Consumer prices rose at their fastest monthly rate in 11 years during June, although oil prices are now falling.
The Fed cut rates aggressively in late 2007, but have frozen them since April.
Economic uncertainty
Experts say uncertainty over how severe and prolonged the economic slowdown will be is making the Fed cautious about any shift in policy.
The continued slump in the housing market and its impact on consumer confidence has made any imminent rate rise unlikely despite signs of increasing inflationary pressures.
Data published on Tuesday showed that the services sector contracted again in June but not by as much as experts had forecast.
Second-quarter gross domestic product (GDP) growth was a stronger-than-expected 1.9%, on an annual basis, although this was aided by government stimulus measures.
Unemployment, meanwhile, has risen to a four-year high while consumer spending is weak, rising only 0.2% in June.
"Expect some strong language about inflation in the statement but no action," economist Joel Naroff said of the outcome of the Fed meeting.
(BBC)
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