Washington ? With the economy advancing only in fits and starts, the Federal Reserve held short-term interest rates steady on Tuesday but left the door open to future reductions.

The Fed’s decision comes amid a roller-coaster stock market and a stream of accounting scandals that have rocked Americans’ confidence in corporate leaders and in their own financial futures.

“The economy has gone flat and they recognize that,” said Mark Zandi, chief economist at Economy.com.

By keeping rates at four-decade lows or, perhaps, nudging them down later federal policy-makers could expect consumers to spend more and businesses to step up investment. That would quicken the recovery, which has lost momentum since the beginning of the year.

A softening in consumer and business demand that emerged this spring “has been prolonged in large measure by weakness in financial markets and heightened uncertainty related to problems in corporate reporting and governance,” the Fed said.

For now, Chairman Alan Greenspan and his Federal Open Market Committee colleagues opted to hold the federal funds rate the interest that banks charge each other on overnight loans at 1.75 percent, the lowest level since July 1961. It marked the fifth consecutive Fed meeting this year in which policy-makers opted to leave rates alone.