WASHINGTON (AFP) -- The Federal Reserve announced Tuesday it was keeping U.S. interest rates unchanged at 5.25 percent as it acknowledged concerns about tightening credit and a persistent housing market slump.

The central bank has now kept U.S. interest rates steady for just over 13 months since June of 2006. The 10 policymakers of the Federal Open Market Committee (FOMC) voted unanimously to keep rates unchanged.
In justifying its decision, the Fed said the world's largest economy seems likely to continue expanding at a ""moderate"" clip, and that its top priority remains the fight against inflationary threats.
But policymakers conceded there were dark clouds looming on the economic horizon.
""Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing,"" the Fed said.
""Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters, supported by solid growth in employment and incomes and a robust global economy,"" the central bank said.
Carl Tannenbaum, a chief economist at ABN AMRO North America, said the Fed made the right call on rates for August, and that the central bank did not want to trigger a market panic by slashing rates.
""They certainly had to make mention in the statement of what I would call the elephant in the room, which is that the credit markets right now are not functioning very well and they do represent a risk to the expansion,"" Tannenbaum said.
Most economists had expected the Fed to keep rates on hold, but some economists say pressure is growing on the central bank to trim rates before the end of the year.
The Fed said future decisions on rates would largely depend on the outlook for inflation and economic growth.
""Although the downside risks to growth have increased somewhat, the committee's predominant policy concern remains the risk that inflation will fail to moderate as expected,"" the central bank stated.
Joel Naroff of Naroff Economic Advisors said that despite the mortgage and credit woes, the Fed continues to signal that it will not cut rates until it believes ""inflation is licked.""
""Despite words about the credit issues, it is still all about inflation,"" Naroff said.
Fears about mortgage failures and tightening credit have sparked volatile trading on US stock markets in the past week.
Recent reports have suggested the worst of the housing downturn, which has also afflicted mortgage lenders, may be far from over.
U.S. home sales fell much more heavily than predicted in June to their lowest level in over four-and-a-half years, and American Home Mortgage, one of the country's largest home loan lenders, became the latest mortgage firm to seek bankruptcy protection this week.
Fed officials have said in recent months that they do not anticipate the housing slump destabilizing the broader economy, and consumer spending -- a vital motor of economic vitality -- appears to be holding up.
The world's largest economy has picked up speed, expanding at a 3.4 percent rate in the second quarter compared with its 0.6 percent crawl in the first three months of the year.
However, some market watchers say deepening housing and credit problems have the potential to derail economic growth.
Other economists, including Tannenbaum, believe the Fed will continue sitting on the rate fence for the rest of the year or until policymakers feel inflation threats have fully abated.
Central bankers typically cut interest rates when housing markets slow to aid homeowners, but persistent inflation concerns, particularly energy costs, have stopped the Fed cutting rates in the past year.
Some inflation gauges have cooled of late and economists added that the Fed could be forced to trim rates sooner rather than late