Low unemployment and flat inflation were clearly central to the Federal Reserve's decision on Tuesday to leave interest rates unchanged. But the Fed also had to make sense of the bellwether housing sector, which has been sending off conflicting signals in the past week.

Driven by single-family construction, housing starts jumped unexpectedly in August to their highest level in two and a half years, the Commerce Department reported last Thursday. Such brisk activity seemed to add fuel to concerns about an overheating economy.

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