The Federal Reserve's Open Market Committee held short-term interest rates steady at 2 percent this afternoon, surprising many Wall Street investors who had been expecting a rate cut to soothe growing fears about the health of the economy.

"Strains in financial markets have increased significantly," the Fed rate-setting authority noted in what must be counted as understatement, given the market's painful blowoff Monday. Labor markets have "weakened further," the FOMC acknowledged.

But while economic growth appears to have slowed, and credit remains tight, the FOMC said, "Over time, the substantial easing of monetary policy" already implemented, along with other Fed measures aimed at helping the financial system remain liquid, "should help to promote moderate economic growth."

Low rates can help a flagging economy regain its feet, but if they're too low they can also overheat an economy and spur inflation; the Fed constantly uses rate policy to balance those two contending forces. Rate cuts the Fed implemented earlier to help out the sluggish U.S. economy have yet to take full effect.