The Federal Reserve kept its benchmark interest rate at 5.25% for a second month as moderating growth and a slide in oil prices suggest lower inflation in coming quarters.

“Inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations and the cumulative effects of monetary policy actions and other factors restraining aggregate demand,” the Federal Open Market Committee said in a statement after meeting in Washington.

Chairman Ben S. Bernanke anticipates the economy, buffeted by a housing slump, will slow enough to ease inflation after 17 rate increases since June 2004. He must balance inflation that’s still above his comfort zone with the concerns of some officials that higher borrowing costs will push up unemployment and reduce spending.

“The moderation in economic growth appears to be continuing, partly reflecting a cooling of the housing market,” the Fed said.

“The committee judges that some inflation risks remain,” the statement added. “The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.”

Treasury notes were little changed after the decision, as was the dollar. Stocks pared an advance.

The FOMC’s decision left the target for the overnight lending rate between banks at the highest level since March 2001. Jeffrey Lacker, president of the Richmond Fed, dissented for a second consecutive meeting in favor of a rate increase.

Crude oil is down about 20% since the Fed last met and has wiped out all the gains for the year, strengthening the case for holding rates steady. In addition to raising costs for manufacturers, oil’s surge to a record in July hurt confidence among consumers, whose spending accounts for more than two thirds of gross domestic product.

All 110 economists surveyed by Bloomberg News expected today’s decision. Traders pegged the likelihood that rates will be unchanged for the rest of the year at 97%, according to the price of futures tied to the fed funds rate on the Chicago Board of Trade this morning.

Economic reports are mixed. Housing starts fell 6% last month to a threeyear low, and a measure of wholesale prices fell, according to government figures yesterday. A report on September 15 showed consumer prices rising at half the pace of the previous month in August. Still, annual consumer inflation rates are above the comfort zone of several policy makers.

Economists, including the Fed’s staff, are trying to assess how lower oil prices, a faltering housing market, a tight labor market and rising wages play into their forecast that slowing growth will cool price pressures.

“Oil prices have come down generally since the last meeting, so I’m sure that they’re feeling some relief that that may give inflation a bit of a rest,” the former Fed Governor and now dean at George Washington University’s School of Business, Susan Phillips, said in an interview yesterday.

The unemployment rate fell to 4.7% in August from 4.8% in July. The Fed staff predicted in August that the economy will grow below its potential for the next six quarters.Economists differ over the depth of the slowdown.

“As the economy bounces back from the oil-inspired soft patch in the second quarter, rate hikes are still possible, and rate cuts are not,” the senior economist at Bank of Tokyo-Mitsubishi UFJ in New York, Chris Rupkey, said before today’s decision. He said he’s “penciling in” a rate increase next month.

Inflation expectations in various surveys and market indicators remain elevated.

Inflation should rise at an average annual rate of about 2.5% a year over the next five years, measured by yield differences on 5-year Treasury Inflation Protected Securities and regular Treasury notes of matched maturity. The expectations measure averaged 2.4% in 2005.

“The Fed believes even though the rate of inflation is too high, it is heading down in the right direction,” the chief American economist for HSBC Securities USA Inc. in New York, Ian Morris, said before the Fed announcement. He predicted no change to borrowing costs for the remainder of this year.

The Fed’s benchmark rate is the highest in the Group of Seven major industrial nations.The Bank of Canada’s rate stands at 4.25%, and the base lending rate in the United Kingdom is 4.75%. The European Central Bank’s refinancing rate is 3%, and ECB President Jean-Claude Trichet said September 9 it will show “strong vigilance” against inflation. The Bank of Japan raised its key rate for the first time since 2000 in July, to 0.25% from near zero.