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Interest rates will not be raised today, reports the Federal Reserve after the committee responsible for setting the rates came to that decision earlier today.

This pause breaks the period of more than two years of Fed rate increases.

The Fed report attributes its decision to the following:

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.

The Fed hinted at some remaining “inflation risks,” indicating that the pause in rate hikes may be short-lived.

The Associated Press report (as posted by the New York Times earlier today) lends some contextual analysis to the decision:

The Fed decision means that banks’ prime lending rate, the benchmark for various consumer and business loans, will remain at 8.25 percent. Before the Fed started raising rates in June 2004, the prime had been at 4 percent, its lowest point since 1958.

In 17 consecutive meetings stretching from June 2004 through June 2006, the Fed boosted the funds rate from a 46-year low of 1 percent to the current 5.25 percent, all in an effort to slow the economy enough to keep inflation under control.

Alan Gin, an economics professor at the University of San Diego, said this was especially good news for borrowers on adjustable-rate, interest-only, or negatively amortized mortgages – those loans are all tied to short-term interest rate variability.

It didn’t exactly help them, Gin said, since the rates didn’t go down, and the previous increases have been hurting those borrowers for a long time. But it did provide some relief from the increases, at least for a while.

“I think it will ease some of the pressures,” he said.

As for how long that relief will last, Gin said there are a lot of factors the Fed will need to consider before the rate-setting committee meets again.

“It’s possible that we’ve seen the last of the increases by the Federal Reserve for a while,” he said.

The Fed usually uses interest rate increases to try to curb inflation, and the rapidly increasing oil prices of late have added to inflation symptoms across the country. But, Gin said there are signs that the economy is slowing overall.

“They have to walk a fine line,” Gin said.

The committee voted nine to one to leave the rate as is, according to the Associated Press report.

KELLY BENNETT

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