The stock market tumbled over 500 points Wednesday as unexpectedly high inflation data fueled fears of smaller interest rate cuts by the Federal Reserve.
The stock market plunged over 500 points Wednesday following worse-than-expected inflation data that raised concerns about the Federal Reserve's next move on interest rates. The core consumer price index (CPI), a key gauge excluding volatile food and energy costs, rose 0.3% from July—the biggest jump in four months—and increased 3.2% year-over-year, according to the Bureau of Labor Statistics.
The inflation uptick rattled investors, with the Dow Jones Industrial Average shedding over 500 points as traders recalibrated expectations for the Federal Reserve’s upcoming meeting. While the Fed is still expected to cut rates next week, the latest inflation data slashed the likelihood of a larger-than-anticipated rate reduction.
Economists closely watch core CPI as a signal of underlying inflation trends. The report showed a 0.2% monthly rise in the overall CPI, held down by declining gas prices. However, shelter costs, which climbed 0.5%, were the primary driver of inflation, along with rising airfares, apparel, and daycare expenses.
Treasury yields spiked, S&P 500 futures dipped, and the dollar regained strength after the report, reflecting investor uncertainty over the Fed’s ability to ease inflation without disrupting economic growth.
With the central bank emphasizing labor market conditions as a key driver for future rate decisions, policymakers will have more data to evaluate ahead of their November and December meetings. Meanwhile, a separate inflation gauge—the personal consumption expenditures price index (PCE)—is set to be released later this month, offering another critical measure of inflation’s trajectory.
.png)