NEW YORK (CNN/Money) - Housing starts jumped 0.6 percent in August to their highest level in five months, the government reported Tuesday. In parallel, interest rates are remaining low, while the economy works its way through a soft patch.

Builders broke ground on a seasonally adjusted 2 million homes on an annual rate in August, the Commerce Department reported, up from the 1.988 million revised figure the previous month.

Economists expected 1.930 million housing starts, according to Briefing.com.

Housing starts last reached the 2 million annual rate in March. They have not exceeded that level since December 2003, when starts reached 2.067 million.

Interest rates have dropped over recent weeks, even as the Federal Reserve Board is expected to raise the overnight borrowing rate by 25 basis points to 1.75 percent. Bonds have benefited from a lackluster stock market, which has been roiled by soaring crude oil prices.

Strength in the housing sector was also reflected in quarterly results from KB Homes and Lennar, each of which topped estimates and raised their profit guidance for the coming quarters.

But builders haven't been filing for those new homes quite yet. Permits to begin construction, a sign of builder confidence, slid 5.5 percent to 1.952 million units in August from a 2.066 million pace in July. Wall Street had expected 1.985 million permits, according to Briefing.com.

Economists will closely watch the Fed's statement Tuesday for any signs that the central bank may pause in its latest rate-lifting campaign.

Federal Reserve Chairman Alan Greenspan has mentioned recently that the economy entered a soft patch over the summer amid rising oil prices but is now in position to resume its growth.