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The Federal Open Market Committee left the Fed Funds Rate unchanged at 2.000 percent this afternoon, as expected. 

In its press release, the Federal Reserve noted the co-existence of inflation and recession. 

On inflation, the Fed said that energy and food prices are contributing to an "elevated state" of inflation, but that it expects price pressures to ease "later this year and next year". 

On the topic of recession, the Fed seemed a bit more concerned.

Overall, markets reacted favorably to the press release; both stocks and mortgage rates showed signs of improvement in the statement's wake.

Source
Parsing the Fed Statement
The Wall Street Journal Online
June 25, 2008
http://online.wsj.com/internal/mdc/info-fedparse0806.html