The Fed's Calming Pause

Markets are relieved by rates on hold.

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As almost everybody had expected, the Federal Reserve today left interest rates unchanged at 2 percent after its two-day meeting, ending 10 months of rate cuts designed to stem slower economic growth and head off the credit crisis.

Stocks are rallying a bit thanks to a post-meeting statement that addressed market fears that central bankers might be ready to get back to fighting inflation with renewed rate hikes.

Central bankers offered no sign that higher interest rates are imminent, saying they'll act "as needed" to head off inflation spurred by rising energy and commodity prices.

The Dow gapped up a quick 20 points before settling back to hold gains notched earlier in the day.

The tone of the statement also looked far brighter than the post-meeting statement in April, when the Fed called economic activity "weak" and cited "some firming" in household spending.

The text of the Fed's post-meeting statement is here.