Observing that it was "closely monitoring" the global economic and financial developments, the US Federal Reserve said it has kept the interest rates unchanged, following which the Dow fell about 223 points.

The Federal Reserve yesterday said it was "closely monitoring global economic and financial developments and is assessing their implications for the labour market and inflation, and for the balance of risks to the outlook."

Given the economic outlook, the Fed decided to maintain the target range for the federal funds rate at 1/4 to 1/2 per cent. The stance of monetary policy remains accommodative, thereby supporting further improvement in the labour market conditions and a return to two per cent inflation, it said in a statement.

The Fed said it currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labour market indicators will continue to strengthen.