Stocks fell today after the Federal Reserve methodically cranked up short-term interest rates by another quarter of a percentage point and squelched Wall Street's hope that the steady escalation of rates will soon end.

The boost in short-term rates to 3.25 percent--the ninth in a row since last summer-- was delivered exactly as expected, but the Fed disappointed traders who had deluded themselves into thinking rates won't go much higher.

Repeating what it's been saying for the last year, the Fed said it plans to keep boosting rates "at a pace that is likely to be measured."

Banks immediately raised their prime rates to 6.25 percent, but in the government bond market, rates on 10-year Treasuries fell slightly. The opposite moves provided more evidence that the bond traders rather than Washington policy makers are setting the rates that matter most.

Low long-term rates still make it extraordinarily cheap for corporations to borrow money and for citizens to buy houses. Rates on 30-year mortgages fell to 5.53 percent, the lowest in 14 months, Freddie Mac reported today.

But Wall Street's view is that the stock market cannot prosper until the Fed stops raising rates. And the Fed made clear that is not going to happen until rates have gotten high enough to fight inflation.

That's been the situation for weeks now, but none-the-less, stocks fell sharply after the Fed's decision was announced.

The Dow Jones industrial average fell almost 100 points to 10,274.97. The Standard & Poor's 500 stock index dropped nearly nine points to 1,191.33. The Nasdaq Stock Market composite index dropped a dozen points to 2,056.96.

Today's losses left all three indexes down for the first half of the year, though the S&P and the Nasdaq composite were up for the second quarter.

The S&P was up a little less than 1 percent over the last three months, leaving it down 1.7 percent for the year.

The Nasdaq Composite gained almost 3 percent in the second quarter but still is off 5.4 percent for the year.

The Dow dropped 2.2 percent during April, May and June and now is down 4.7 percent year to date.

Jerry Knight will off tomorrow. His column will resume Tuesday.