Ben S. Bernanke says he’s worried about inflation, and the stock market dropped nearly 200 points in response. Speaking at the International Monetary Conference in Washington on Monday, Bernanke said there are many signs that the economy is in transition, including:

• slowing consumer spending
• a cooling real estate market
• increased energy costs
• a slight rise in unemployment numbers

At the same time, there are positives, such as:

• increased worker productivity
• more investment in business
• a more robust economy worldwide, which should bolster the American economy

Still, Bernanke said inflation is a major problem, mostly because of high energy costs. The speech is pretty dry, but here’s one part most readers can understand:

With the economy now evidently in a period of transition, monetary policy must be conducted with great care and with close attention to the evolution of the economic outlook as implied by incoming information. Given recent developments, the medium-term outlook for inflation will receive particular scrutiny.

Many investors and analysts take that to mean interest rates will be going up again, which explains the market correction that took place after the speech.

Source: Speech transcript