INSTANT VIEW - Fed leaves rates unchanged as expected

NEW YORK (Reuters) - The U.S. Federal Reserve held its federal funds rate steady at 2.0 percent, as expected, on Tuesday in an effort to nurse the economy back to health without further exacerbating inflation.

"Although downside risks to growth remain, the upside risks to inflation are also of significant concern to the committee," the Federal Open Market Committee said in a statement today in Washington.

COMMENTS:

TONY CRESCENZI, CHIEF BOND MARKET STRATEGIST, MILLER TABAK, NEW YORK:

"The Federal Reserve went for the jugular by indicating increased concern about inflation even though the most recent set of economic data and developments in the financial markets signals relief on the inflation front. This may worry those who would rather the Fed back away from any inclination toward interest rate hikes and possibly move toward interest rate cuts, but it is probably the best thing for the economy and the financial markets because it will help kick inflation while its down, or moving down, and lower the chances at a revival at both the decline in the value of the dollar and the rally in commodity prices."

ASHRAF LAIDI, CHIEF FX STRATEGIST AT CMC MARKETS U.S. IN NEW YORK:

"The dollar is retreating a little bit and the stock market is rallying because there was only one dissenter as opposed to what was feared to be two. This shows that inspite of all the hawkish talk that Plosser made over the past weeks, the fact that he did not vote for a rate hike, (means) he like the other members of the Fed think that the decline in energy prices will be more protracted and that combined with the global slowdown is further going to dampen inflation.

"They continue to be preoccupied with housing and credit conditions. They tweaked their labour market assessment to say it has softened further. Right now the question is whether the bond market is going to further scale down its expectations further of rate hikes this year. I am expecting rate cuts and we are slowly moving in that direction. Overall this is a slightly less hawkish statement than the previous one. I would call it a discrete move back to neutral."

BRUCE MCCAIN, CHIEF INVESTMENT STRATEGIST, KEY PRIVATE BANK, CLEVELAND, OHIO: