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The Federal Reserve did not raise interest rates this session as expected, and the cheers in the streets as homeowners with Adjustable Rate Mortgages and credit card borrowers cheered as if the hometeam won the World Series. After 17 straight increases to the Fed Funds Rate the lull as the Fed reassesses the marketplace is a welcome relief. Ben Bernanke had dissention as one of the Fed Members still wanted another rate increase.

Fortunately, cooler heads kept the rates stable for this session of the Fed’s meeting.

For the first time since Ben Bernanke took over as chairman on Feb. 1 from Alan Greenspan, the policy-setting Federal Open Market Committee did not agree to the action unanimously. Federal Reserve Bank of Richmond president Jeffrey Lacker dissented, favoring instead another quarter-point increase.
The statement said, as it did after the last meeting in June, “Some inflation risks remain. The extent and timing of any additional (increases) … to address these risks will depend on the evolution of the outlook for both inflation and economic growth.”
The retention of that sentence in effect reflects a continued bias, but not a presumption, to raise rates in the future. In effect, the Fed gave itself some breathing room to assess the impact of the preceding 17 quarter-point rate increases before deciding whether to hike again. Mr. Bernanke has been suggesting since April that he was seeking more flexibility.
“A pause does not mean a stop,” said Stephen Stanley, chief economist at RBS Greenwich Capital Markets. “And there’s certainly ample evidence the economy has been on a slowing trajectory over the last couple months. There’s enough evidence there for them to take six weeks off.” WSJ.com – subscription required

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