Inflation, to some degree, is good for the economy, as it allows businesses to slowly raise prices and generate profits. It can also translate into higher wages over time. However, rapid or sizable gains in the inflation rate can be a killer for the economy, and inflation scares can spook stock prices as well. When prices rise dramatically, the cost of operating a business rises as well. Not all of these increased costs can be passed along to consumers, resulting in reduced profits for businesses. Periods of rising inflation also tend to lead to higher Fed interest rates and tighter labor markets, further crimping corporate profits. Once business earnings are impaired, the familiar cycle kicks in: Reduced earnings lead to declines in share prices, potentially triggering a bear market.