WASHINGTON -- The Federal Reserve is probably going to pause for a while before considering another increase in short-term interest rates, Treasury Secretary Lloyd Bentsen said yesterday.
"I think the Fed has sent a very clear indication that they're ready for a respite to see this thing settle down, and hopefully stabilize," Bentsen told a conference of the National Association of Securities Dealers.
His comment supported the view of bond market participants, who were encouraged by the Fed's statement this week that the increase in the federal funds rate to 4.25% from 3.75% essentially marked the end of an accommodative monetary policy by the central bank.
Bentsen refrained from criticizing the Fed for the latest credit tightening, saying, "I think the Fed and the Treasury share the same objective of sustained growth with low inflation."
Bentsen said that at this point, he does not believe long-term interest rates hold any danger of cooling the economy in housing or other interest-rate sectors. But if long rates go up any further, he said, "then I certainly think we'll see a contractionary effect."
