Fed holds fire on further policy action

The Federal Reserve has opted to leave monetary policy unchanged and continue with Operation Twist at least until the new year, amid signs the world's largest economy has been expanding.

Following its December meeting, the Federal Open Markets Committee (FOMC) said it would continue its programme to extend the average maturity of its holdings of treasuries, previously announced in September.

However, it opted not to take any further policy action.

In a statement it said: "To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September."

The Fed remains concerned that while the US economy is recovering, Europe is now posing more of a risk.

It said: "The Committee continues to expect a moderate pace of economic growth over coming quarters and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate.

"Strains in global financial markets continue to pose significant downside risks to the economic outlook."

It added rates - which were left at the record low of between 0% and 0.25% - would be on-hold until at least the middle of 2013.