Change in Fed's tone on inflation rattles investors Bond, stock prices drop as rate rises
Topic 1USA TODAYChange in Fed's tone on inflation rattles investors Bond, stock prices drop as rate risesMarch 23, 2005, Wednesday,John Waggoner in McLean, Va.NEW YORK -- The Federal Reserve uttered the dreaded "I" word Tuesday, sparking a Wall Street sell-off and setting the stage for higher mortgage rates.Prices of stocks and Treasury bonds swooned after the Fed said "pressures on inflation have picked up," an admission that suggests the central bank's campaign to increase interest rates is far from over.The Fed, as expected, raised its target for short-term rates Tuesday a quarter of a percentage point to 2.75% -- its seventh increase since June 30. But the news that caught investors off guard was the change in tone of the Fed's closely read statement.
