Stocks opened sharply lower as Wall Street comes to the realization that inflation isn’t slowing as much as it had hoped. The higher-than-expected report on inflation likely means the Federal Reserve will ultimately have to raise rates higher.
The Labor Department reported Tuesday that sharply lower prices for gas and cheaper used cars slowed U.S. inflation in August for a second straight month, but prices for food surged.
Markets in Europe also reversed course at midday after the U.S. inflation data was released, with the FTSE 100 in London and the DAX in Frankfurt both losing 0.3% and the CAC 40 in Paris down 0.2%. Fed officials have affirmed support for substantial rate hikes and to keep borrowing costs elevated for long enough to make sure inflation is extinguished.Consumer prices surged 8.3% in August compared with a year earlier, the government said Tuesday. Though still painfully high, that was down from an 8.5% jump in July and a four-decade high of 9.1% in June. On a monthly basis, prices rose 0.1%, after a flat reading in July.