The Federal Reserve leave rates unchanged at 6.50 percent.

The Federal Reserve Bank left U.S. interest rates unchanged overnight and warned the economy is still growing at a pace that threatens accelerating inflation. That suggests the Fed could increase borrowing costs by August unless further signs of slower growth emerge.

Recent economic statistics showing a drop in new home constructions and a rise in the nations unemployment rate to 4.1 per cent in May influenced the Fed’s decision not to increase rates this month.

Since June 1999 the Fed’s have increased rates six times from 4.75 percent to 6.5 percent.

The Australian dollar drifted higher overnight as the market was assured that the interest rate differentials between Australia and the United States was being maintained.

With the Reserve Bank of Australia meeting next Tuesday we do not expect any changes to the official cash rate which is currently 6.00 percent.