Fed keeps interest rates steady

WASHINGTON, May 19: The US Federal Reserve decided to leave benchmark interest rates unchanged, but said it is so quot;concerned about the potential for a buildup of inflationary imbalancesquot; that it is leaning toward raising rates in the coming months for the first time in nearly a year.

Financial markets reacted negatively to the news. The Dow Jones Industrial Average, which had been up nearly 70 points before the 2:15 p.m. Eastern time announcement, quickly reversed course and ended the day down 16.52 points at 10836.95.

The decision leaves the Fed8217;s target for the federal funds interest rate at 4.75, the level at which it has been since November. The Fed manipulates the fed-funds rate, at which banks lend to each other overnight, by buying and selling government securities. The Fed Tuesday left unchanged the discount rate, at which it lends directly to banks.