Reply #5: Interest Rates Has Wall Street Puzzled

[ozymandius]

NEW YORK - It's an uncertain time for investors as robust consumer prices are again muddling the outlook for interest rates.

Wall Street had grown hopeful that the Federal Reserve would soon end its interest rate hikes, but a mix of economic data in recent days have prompted a sharp stock sell-off. The Dow has shed 437 points over the past five trading sessions, including a 214 point tumble on Wednesday.

-cut-

But those hopes came crashing down last week after the Fed signaled that inflationary pressure from record oil and metal prices continues to be a problem and could require further rate hikes. The central bank has boosted interest rates 16 times since June 2004, aiming to cap escalating prices.

On Wednesday, the Labor Department's consumer price index confirmed some of Wall Street's worst fears. Core prices rose more than economists had predicted, which came as a sign that soaring oil prices have begun to affect other parts of the economy.

more