Interest Rates: Look, Ma, No Pause!

After teasing Wall Street with his utterances in the last two weeks, Federal Reserve Chairman Ben S. Bernanke managed not to spring a big surprise at the central bank's May 10 meeting. As widely expected, the Federal Open Market Committee raised interest rates for the 16th time in a row since June, 2004, to 5%. And the panel carved out some wiggle room to continue raising rates or pause in the future. "They opened the door for stop-and-go Fed policy," says Diane Swonk, chief economist at Mesirow Financial in Chicago.

Accomplishing this balancing act has been tricky. Only three months into the job, Bernanke is operating at a delicate time, when the Fed has to determine when and how to ease up on its long rate-raising march. Wall Street, accustomed to lockstep rate increases, has been on edge over the transition. And that has made Bernanke's campaign to improve communications with investors and the public all the more difficult.