Fed Raises Interest Rates to 5 Percent, Hints at Pause

Washington DC May 11, 2006; The AIADA newsletter reported that the Federal Reserve raised interest rates another quarter point to 5 percent, but in its accompanying statement indicated there may be a pause at the next board meeting.

The raise marks the 16th consecutive increase dating back to mid-2004. All 11 voting members on the 18 member Federal Open Market Committee voted to raise the rate. Further increases "may yet be needed to address inflation risks," the Fed said in its report, adding it "emphasizes that the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information."

According to the Wall Street Journal, "The Fed and its new chairman {Ben Bernanke} are at a delicate juncture. At 5 percent, short-term rates are now about neutral -- neither so low that they stimulate spending, nor so high that they restrain it." The Fed's next meeting will be late next month.