Fed still concerned about inflation

Perhaps a little surprisingly, the Federal Reserve held the Fed Funds target rate steady today and indicated again that it was concerned about economic growth as well as inflation, a statement investors took as a welcome sign the central bank will not raise rates any time soon

It was the seventh straight time that Fed Chairman Ben Bernanke and his fellow policy-makers held steady after raising rates 17 straight times, through June 2006, in a bid to fight inflation.

The Fed noted that economic growth slowed early this year, but indicated it's also still worried about inflation, saying "the predominant policy concern remains the risk that inflation will fail to moderate as expected."

But it also said that "future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth," language identical to what the central bank said when it held rates steady in March.

But as far as Wall Street is concerned, inflation no longer seems such a prevalent threat. The Fed's decision to leave rates alone comes at an interesting time for the financial markets. Stocks have been on a tear since March despite the slowest economic growth in four years in the first quarter.

The Fed acknowledged this weakness in its statement but reiterated that it did not expect the economy to weaken much further.

"Economic growth slowed in the first part of this year and the adjustment in the housing sector is ongoing. Nevertheless, the economy seems likely to expand at a moderate pace over coming quarters," the Fed said.