The Federal Reserve kept its benchmark interest rate at 2 percent as employment faltered and financial markets remained "under considerable stress."

"Labor markets have softened further,'' the Federal Open Market Committee said in a statement today in Washington. "Tight credit conditions, the ongoing housing contraction, and elevated energy prices are likely to weigh on economic growth."

Stocks stayed higher on speculation that policy makers will leave borrowing costs unchanged in coming months. Officials said they still expect inflation to slow, while acknowledging that the outlook for prices is ``highly uncertain."

"Although downside risks to growth remain, the upside risks to inflation are also of significant concern to the committee," the statement said.

Dallas Fed President Richard Fisher dissented for a fifth time this year, preferring an increase.

"Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities," the Fed said. "The committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain."

Continued at Bloomberg.com