The Federal Reserve is doing its part to hold interest rates steady.

The Fed's Open Market Committee kept its target for the federal funds rate unchanged today, at 2 percent. The prime rate will remain 5 percent. Home equity lines of credit and most variable-rate credit cards are indexed to the prime rate, so their rates will remain unchanged. Long-term interest rates, such as those paid on fixed-rate mortgages, are governed by market forces and don't necessarily follow the Fed's lead.

Among economists, the consensus is that the Fed won't change short-term rates until late this year or early next year -- and when that time comes, the central bank will raise rates to combat inflation. In the meantime, the Fed's preferred inflation-fighting weapon will be "jawboning," or "trying to talk inflation down instead of doing something about it," in the wry words of Kenneth Thomas, finance lecturer at the University of Pennsylvania's Wharton School.

In a statement explaining its interest rate policy, the Fed said tight credit, the slumping housing market and higher fuel prices will weigh on economic growth in the next few quarters. It added: "Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities, and some indicators of inflation expectations have been elevated."

Richard Fisher, president of the Dallas Fed, cast a dissenting vote. He wanted to raise the federal funds rate.

No one was surprised by the Fed's decision to keep rates steady. The central bank likes to foreshadow rate changes, and did nothing of the sort over the past few weeks. Fed officials have been in wait-and-see mode for months as the economy has slowed down while, at the same time, prices have risen swiftly.

Richard DeKaser, chief economist for National City Corp., says the Fed's decision to keep rates unchanged reflects "a compromise between the desire to raise interest rates to thwart inflation pressures and concern about the economy still being on shaky legs. Basically, it's a tradeoff between inflation mitigation and securing economic growth -- and the two forces seem to be reasonably well-balanced at this point."

The rate-setting Federal Open Market Committee has a few members who are believed to be less hesitant to raise rates. These "inflation hawks" include Fisher and Charles Plosser, president of the Philadelphia Fed. Other members of the rate-setting panel might not be exactly doves, but they don't appear to be eager to raise rates when the economy might be slipping into recession.

"Clearly, there are concerns about inflation, but the biggest concern has to be about the recession I believe we're in," Thomas says. If inflation takes off next year, the inflation hawks will be in a position to say "I told you so," Thomas acknowledges.

"But we have to do first things first," he adds. "When we have a serious problem, we have to put out the fire. Then we can go in and salvage things and so forth. Inflation, in my mind, is not the fire here. Now the fire is clearly the recession, the housing market, the credit crunch. These are the big issues."

The rate-setting committee meets eight times a year. Last fall, the Fed began cutting rates aggressively in response to the credit crunch that's still roiling mortgage markets and is now causing trouble in credit card markets. The federal funds rate plunged from 5.25 percent to 2 percent from September to April. At 2 percent, the federal funds rate is at its lowest since late 2004.

The next meeting of the FOMC is Sept. 16.