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Federal Reserve Pauses Rate Hikes

Members of the Federal Reserve have voted against raisng interest rates, pausing the run of 17 straight interest increases in the past two years.



When the increases began, the federal funds rate stood at 1.00%. They were paused today at an overnight lending rate of 5.25% and a commercial bank prime lending rate of 8.25%. These are the highest rates seen since March 2001.



The decision was based on continued proof that the economy is cooling down.



Economic growth has moderated from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices, said the Fed in its statement.



However, Fed Chairman Ben Bernanke and other members do not feel that the threat of inflation has been completely eliminated.



In its statement, the central bank indicated that there is room for future rate increases according to future economic growth and inflation reports.



One member, Jeffrey Lacker, President of the Richmond Fed, cast a vote against the pause. He said he would have rather raised rates another quarter-percentage point.



The majority of bankers felt that inflation pressures seem likely to moderate over time.



After the ruling, financial markets fluctuated, with stock prices increasing then declining. Market indicators ended the day moderately lower.



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