The Federal Reserve recently kept the overnight borrowing rate unchanged for the second straight month after 17 consecutive monthly increases. Fed watchers disagree when the Fed will resume rate increases, but there is a growing consensus that rates are likely to remain steady for a few months. The reason is clear: Inflation is down and likely to remain steady in the near term.

Increases in the producer price index have been small, and the core producer price index has even been negative. The recent fears of accelerating inflation have largely disappeared. This can be seen in three sectors: Commodities, housing, and government securities.

Prices for energy and most primary metals such as iron and copper have retreated from record highs. Most primary commodities still have prices well above 2005 levels, but the direction is now clearly downward. As commodity prices have declined, so have the prices of corporate securities of companies that extract and refine — from Alcoa to Exxon. Equity prices rose in the first half of the year as the peak of commodity prices was unforeseeable.

Rising commodity prices have not reflected concerns about American monetary policy as much as fundamental imbalances in the underlying commodity markets. Many of these imbalances, however, have been one-time events that may not have lasting effects on commodity prices.

For example, petroleum supplies in the past year have been disrupted for reasons ranging from hurricanes in the South Atlantic to pipeline shortcomings in Alaska and the Middle East.

The largest copper mine in the world, Escondida, owned by BHP Billiton Ltd., had a major strike in August. Government-owned copper mines suffered a landslide. Although copper production suffered a temporary slowdown, projections for next year call for a resumption of normal production schedules.

For many commodities, higher prices have attracted investment in new sources of production such as petroleum from oil sands in the Rocky Mountains and in Canada. These new investments will, over many years, ensure a more stable supply of commodities and help reduce the volatility of price movements.

The housing market has stabilized from its unsustainable levels of 2004 and 2005, decreasing to an annual rate of 1.77 million housing starts in August. The housing market affects many sectors of the economy, including mortgage banking, furniture, construction trades, and home appliances. A more sustainable housing market will reduce some of the consumer spending from home equity loans.

On the other hand, commercial construction is picking up the slack in the construction trades. Construction employment remains at record levels and shows little signs of abating.

As well as the slowing housing sector, second-quarter gross domestic product estimates show growth of 2.9%, still above trend but lower than the previous year’s growth of 3.2%. Most experts see a slowdown of GDP in 2007.

However, the labor market continues to be strong. The unemployment rate is holding steady at 4.7%. New unemployment claims, a sign that the economy would be weakening, have actually been declining in recent weeks. Increasing federal tax receipts are also a good indicator of American economic growth. The federal government is receiving record tax revenues, and the federal deficit is now running 14% smaller than last year, despite substantial increases in federal spending.

Paradoxically, if the economy were performing poorly and generating relatively few federal tax receipts, Congress might be tempted to exacerbate economic woe by increasing taxes. Despite federal spending excesses, the underlying soundness of the American economy continues to generate additional tax revenues. These revenues should discourage Congress from passing new rounds of harmful tax increases.

Part of the demand for dollars reflects dollar-denominated transactions outside the United States, beyond even indirect influence of our governmental policies. The International Monetary Fund predicts world economic growth at 5.1% in 2006 and 4.9% in 2007. Some Asian economies may grow at twice these rates while the American economy will grow at roughly half these rates.

Despite the performance of these emerging economies, America still remains crucial to the world’s growth. If our economy slides into recession, others will not be far behind.

Hence, what the Fed does is vital not just to our economy but to others. A pause in interest rate increases would be in everyone’s best interests.

A former FCC commissioner, Mr. Furchtgott-Roth is president of Furchtgott-Roth Economic Enterprises. He can be reached at hfr@furchtgott-roth.com