The US Federal Reserve put its determination to ensure a smooth financial transition into the new year ahead of concerns about the rapid pace of domestic economic growth and left interest rates unchanged yesterday.

The central bank's policy-making federal open market committee (FOMC) left its key short-term interest rate, the federal funds target rate, at 5.5 per cent at its last meeting of the year. And, to underline its eagerness to prevent financial problems from the computer date changeover to the next century, the committee also said it was leaving its policy "bias", which indicates what the next move in rates might be, unchanged, at neutral.

But the Fed hinted that this position was only temporary and indicated that, after the Y2K computer bug hurdle, concerns about the frenetic pace of domestic growth would dominate.

"Based on the available evidence the committee remains concerned with the possibility that increases in demand will continue to exceed the growth in potential supply," it said.

Most economists believe the Fed would probably have raised rates at its meeting yesterday were it not for lingering fears of financial disruption from the century date change.

The Fed is committed to maintaining plentiful liquidity in case of funds shortages over the new year period and an interest rate increase might have complicated that task. An increase still seems highly likely after the next FOMC meeting on February 2nd. Money market rates indicate investors are betting on at least a 0.5 percentage point increase in short-term rates over the first half of the year.

There are scant signs of inflation in the US economy. In the year to November, core consumer prices rose by a meagre 2.1 per cent, a rate virtually unchanged over the last year. But Fed officials have expressed mounting concern in recent weeks that the rapid pace of US expansion in the last six months is not sustainable and will eventually produce an acceleration in wages and prices.