The Federal Reserve voted unanimously to keep interest rates steady at its policymaking meeting in August, despite a run up in oil prices that was expected to sap economic growth, according to minutes released Friday.

The steep rise in oil prices that followed Iraq's invasion of Kuwait on Aug. 2 was expected to have a "retarding effect" on economic activity during the months ahead and push inflation higher."At the conclusion of the committee's discussions all the members indicated that they favored . . . a directive that called for maintaining unchanged conditions of reserve availability, at least initially, in the intermeeting period ahead," the minutes said.

The Fed releases the minutes of its past meeting once the following session of the policymaking committee is concluded. The Federal Open Market Committee met Tuesday in Washington.

Even without the impact of the Persian Gulf conflict, the Fed members generally thought that economic growth would remain limited.

Rising oil prices were expected to boost inflation sharply in the next few quarters, but the Fed noted that the adverse effect over the long-run would be limited.

"In the circumstances, they would anticipate some decline in the rate of inflation, though progress was likely to occur only after a nearer-term setback," the minutes said.

The FOMC members thought that the economy was growing slowly before Iraq's invasion of Kuwait and that wage and price inflation had not eased despite slow growth in the nation's money supply.

In July, the Fed had lowered its target for the federal funds rate to 8 percent from 8.25 percent in response to tighter lending conditions at banks.

Some members "sensed that lending institutions as a group had not tightened credit terms further in recent weeks," the minutes said.

But the Fed added, "Members remained concerned about the exposure of many financial institutions and of heavily indebted business firms and individuals to adverse economic developments."