The Federal Reserve got the blame again today for scaring investors away from stocks with talk of inflation and higher interest rates.
Fed policy makers are more worried about inflation infecting the economy than about the damage done by hurricanes, minutes of their September deliberations on interest rates revealed today.
The Fed always releases details of its discussions a few weeks after it announces a decision on interest rates. The minutes of the Sept. 20 meeting repeated the message that Federal Reserve officials have given in a series of recent speeches: to fight inflation, we're going to keep raising interest rates.
The bond market reacted immediately, boosting rates on 10-year government bonds by 0.04 percentage points to 4.39 percent.
Encouraged by a smattering of positive earnings reported, stocks were struggling ahead in early trading, but trended down as Wall Street reacted to the economic news.
The Dow Jones industrial average managed to score a tiny 14-point gain, closing at 10,253.17. But other indexes closed lower. The Standard & Poor's 500 stock index fell two points to 1,184.87. The Nasdaq Stock Market composite index plunged 18 points to 2,061.09.
The Fed's repeated warnings about the danger of inflation, have traders worried about what to expect come Friday, when the government issues its September report on consumer prices.
Business economists surveyed by Bloomberg predict the report will show the biggest jump in consumer prices in 15 years.
Economists sometimes factor out energy prices from their inflation calculations, arguing that fuel prices jump around all the time anyway. But even if energy accounts for all of the inflation shown in Friday's consumer price index, Wall Street will have to pay attention--because the Federal Reserve certainly will.