New York – Wall Street pulled back Tuesday, finishing slightly lower as investors grappled with an economic assessment by the Federal Reserve that warned yet again of inflation risks and reported a substantial slowing of the housing sector.
The statement, which accompanied the Fed’s widely expected decision to keep the nation’s benchmark interest rate unchanged at 5.25 percent, left open the possibility that the central bank might raise rates if inflation accelerates. That disappointed some investors who were hoping for signs that the Fed was moving toward cutting rates.
Investors fear that an increase could cause problems if it comes as the economy – in particular, the interest-rate-dependent housing sector – is still slowing.
The Fed’s statement described the housing market’s slowdown as “substantial,” a change from past statements.
Still, while the Fed has said its primary concern is inflation, it is also monitoring the overall economy for signs of too much of a slowdown. The Fed predicted that “the economy seems likely to expand at a moderate pace on balance over coming quarters.” Overall, the statement indicated that the Fed wants to keep rates steady for as long it can, analysts said.
“They’re trying to talk tough in the hopes of not having to act tougher,” said Jack Caffrey, equities strategist at J.P. Morgan Private Bank.
The Dow Jones industrial average was down 12.90, or 0.10 percent, at 12,315.58. Earlier in the day, it fell more than 76 points.
Broader stock indicators also fell but closed above their lows as well. The Standard & Poor’s 500 index slipped 1.48, or 0.10 percent, to 1,411.56, and the Nasdaq composite index fell 11.26, or 0.46 percent, to 2,431.60.
Crude oil for January fell 27 cents to settle at $60.95 a barrel on the New York Mercantile Exchange.
