Washington ? With two members dissenting, the Federal Reserve on Tuesday left a key interest rate unchanged as the nation’s economic recovery struggles to ride out the roller-coaster stock market and rising worries about war with Iraq.

While the Fed held short-term interest rates steady, it continued to leave the door open to future rate reductions if economic conditions worsen.

The decision of the Federal Reserve Board is visible on television screens as work continues on the New York Stock Exchange trading floor. With two members dissenting, the Federal Reserve on Tuesday left a key interest rate unchanged as the nation's economic recovery struggles to ride out the roller-coaster stock market and rising worries about war with Iraq.

By keeping rates low or possibly nudging them down later, Fed policy-makers hope to motivate consumers to spend more and businesses to ramp up investment, something that would strengthen the fragile recovery.

Two of the 12 Fed members Edward Gramlich and Robert McTeer voted against the central bank’s decision on Tuesday to leave rates unchanged. They wanted to see the funds rate lowered.

The Fed said that economic information since its last meeting on Aug. 13 suggests that consumer and business demand is “growing at a moderate pace.”

Over time, the Fed’s currently low interest rates and gains in productivity should be “sufficient to foster an improving business climate,” it said.

However, the Fed said that “considerable uncertainty persists about the extent and timing of the expected pickup in production and employment owing in part to the emergence of heightened geopolitical risks.”

For now, Federal Reserve 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 in 41 years. It marked the sixth consecutive Fed meeting this year that policy-makers decided to leave rates alone.

However, the Fed continued to view the possibility of weak economic conditions, rather than inflation, as the greatest risk to the economy. That signaled that the Fed is prepared to cut rates, if necessary.

President Bush remained upbeat, telling reporters at the White House that “when you combine the productivity of the American people with low interest rates and low inflation, those are the ingredients for growth.”

But we have more work to do,” he said. “There are things that Congress and the administration can do together to make sure that people work.”

Economists said the 10-2 decision shows the difficulty even among experts to divine where the economy is heading.

“It does indicate that this is a time where there is a large dispersion of opinions not only about where the economy is going and the risks but exactly where were we are as we move into the final quarter of this year,” said Lynn Reaser, chief economist at Banc of America Capital Management.

The Fed’s decision to hold the funds rate steady means that commercial banks’ prime lending rate the benchmark for many loans will remain at 4.75 percent, the lowest level since November 1965.

After being knocked down by last year’s recession, the economy is back on its feet but isn’t bursting with vitality. Stock market woes, a stagnant job market and heightened concerns about a war with Iraq could threaten the recovery.

Businesses have remained reluctant to make big commitments in hiring and capital spending, two factors restraining the recovery. Manufacturing lost considerable momentum in August.