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Fed leaves rates unchanged, says economy growing at moderate pace

Insight on the Fed's decision, with Bill Gross, PIMCO and CNBC's Steve Liesman.

The Federal Reserve announced no new changes to interest rates Wednesday, taking the easy way out with less than two weeks left until the presidential election.

In its statement after a two-day meeting, the Federal Reserve Open Market Committee, which sets monetary policy, said the economy was expanding at a modest pace, unemployment remains elevated, household spending has picked up and the housing sector has shown signs of improvement. It repeated its pledge to leave interest rates at record lows near zero percent to help accelerate a recovery that has been sluggish, at best, with unemployment near 8 percent and economic growth at around 1.3 percent.

The Fed also made a veiled reference to Washington, where lawmakers have so far avoided taking action on a slew of tax increases and spending cuts expected in the new year which Fed Chairman Ben Bernanke has referred to as a "fiscal cliff" that could throw the economy back into a recession.

"The Committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions," the Fed's statement said.

The Fed said inflation has picked up a bit, reflecting higher energy prices. These have moderated somewhat recently, however, with gas prices down below $4 a gallon on average, which is still expensive. The Fed said it sees long-term inflation remaining stable.

The central bank also said it would continue with its plan, announced six weeks ago, to boost economic growth by buying up mortgage bonds to the tune of $40 billion a month.

It saw risks to the economy from what it called "strains in global financial markets." The Fed was referring to the situation in Europe, where a growing debt crisis has sent some smaller European economies into recession and has tapped the brakes on the continent's larger economies, including its powerhouse, Germany.

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