WASHINGTON — Reassured by evidence that wage and price increases remain under control despite robust economic growth, the Federal Reserve voted Tuesday to leave interest rates unchanged, but warned that it might raise them later in the year if inflation creeps up.
The decision displayed the Fed's confidence that the economy is gradually moving onto a path of slightly more modest, though more sustainable growth, but suggested that the central bank was not yet sure that its campaign of rate increases was complete.
The task of bleeding off any inflationary pressure without ruining a business expansion is a tricky one under any circumstances, and it has been especially complicated in this cycle because, many think, some old rules have been rendered obsolete by the changes that technology and globalization have brought to the economy.
Analysts and policymakers are increasingly certain that the economy is capable of a substantially faster pace of noninflationary growth than it was a few years ago, although there is considerable debate in and outside the Fed about where the new tipping point might be and how close the economy is to it.
As it often has in recent years under its chairman, Alan Greenspan, the Fed chose Tuesday to be patient but at the same time to offer reassurances that it would move quickly at the first sign of a threat from inflation.
"Recent data have indicated that the expansion of aggregate demand is moderating toward a pace closer to the rate of growth of the economy's potential to produce," the Fed's policymaking arm, the Federal Open Market Committee, said in a statement.
Nonetheless, the panel said, "the risks continue to be weighted mainly toward conditions that may generate heightened inflation pressures in the foreseeable future."
The decision means that the Fed is likely to remain on the sidelines for the duration of the presidential campaign. The central bank's policymakers are next to meet on Oct. 3. But the bank has, over the years, tried to avoid taking any action on interest rates in the weeks leading up to Election Day — which falls this year on Nov. 7. The Fed's first meeting after the election is on Nov. 15.
The outcome of Tuesday's meeting had been widely expected by analysts and investors, and there was muted reaction in the financial markets after the announcement at 2:15 p.m. Stocks finished the day slightly higher, with the Dow Jones industrial average closing at 11,139.15, up 59.34 points. Bonds were little changed.
Tuesday's decision left the Fed's benchmark federal funds target rate on overnight loans between banks at 6.5 percent, where it has been since May, when the central bank raised the rate by half a percentage point. The Fed held rates steady at its subsequent meeting in June.
It also left unchanged, at 6 percent, its discount rate — the interest rate on loans to banks from the Federal Reserve system.
The central bank has pushed the federal funds rate up by 1.75 percentage points in six steps since June 1999 in an effort to tamp down inflation pressure without snuffing out what earlier this year became the longest business expansion on record.
Some analysts said it was now unlikely that the Fed would raise rates again this year. Others said inflation remained a threat and that it would be a mistake to count the Fed out.
"As intoxicating as a soft-landing scenario is," said Carl Tannenbaum, chief economist at LaSalle Bank in Chicago, "we have to remain sober for at least another couple of quarters before we allow ourselves to imbibe of it."
In the second quarter of the year, the economy grew at a 5.2 percent annual rate, compared with a 4.8 percent annual rate in the first three months of the year.
Those figures were well above what many economists think can be sustained over the long run without igniting a spiral in wages and prices. While it remains a moving target, the economy's noninflationary speed limit now seems to be around or just below 4 percent.
Yet inflation has edged up only slightly from very low levels, in large part because the strong economic growth has been accompanied by a surge in business efficiency, or productivity, which improved at a 5.3 percent annual rate in the second quarter.
Even as companies find themselves paying more to attract workers in a labor market where unemployment is at 4 percent, and more for raw materials or equipment, they are managing to cut costs in other areas or improve efficiency by investing in new technology.
Within the Fed, there is a long-running debate about whether productivity improvements can continue to outrun inflation pressure. In keeping rates unchanged Tuesday, the Fed seemed to be deferring the matter rather than trying to settle it.
In its statement, the Federal Open Market Committee noted that economic indicators were showing "that more rapid advances in productivity" had been forcing economists to revise upward their estimates of how fast the economy could grow without igniting inflation. At the same time, the committee said, productivity improvements have been "containing costs and holding down underlying price pressures."
But the policy panel suggested that productivity improvements were not a panacea and that the combination of low unemployment and strong growth still had to be viewed as inflationary, especially to the degree that strong demand for goods and services outstripped the economy's ability to keep up.
The committee, its statement said, "remains concerned about the risk of a continuing gap between the growth of demand and potential supply at a time when the utilization of the pool of available workers remains at an unusually high level."