Dow tumbles nearly 1,300 points on August inflation news in worst day since June 2020

Major stock market indexes tumbled on Tuesday, marking the worst one-day stock performance since June 2020, after a key measure of inflation came in worse than expected.

The Dow Jones Industrial Average fell 1,276 points, a decline of 3.94 percent. The S&P 500 fell 4.32%, while the Nasdaq Composite fell 5.16%.

The drop, which canceled weekly gains, came after the Bureau of Labor Statistics revealed that the Consumer Price Index (CPI) rose 8.3% in August from the same time last year and rose 0.1% from the previous month.

The rise was worse than the 8.1 percent increase that economists had expected, according to Dow Jones estimates.

The monthly figures also came in worse than expected, with economists forecasting a -0.1 percent CPI change, but instead the gauge rose 0.1 percent.

Total food spending jumped 11.4%, the biggest increase since May 1979. The cost of “food at home” rose 13.5% year-over-year, the biggest increase since March 1979.

Core CPI, excluding volatile energy and food prices, rose 6.3% year-on-year and 0.6% month-on-month.

The new data raised concerns among investors that the Federal Reserve will take an aggressive approach in fighting inflation that could send the US economy into recession.

The new inflation data was released just one week before the Fed’s scheduled September 20-21 meeting. expected to announce a third consecutive rate hike of 0.75 percentage points to fight inflation.

Federal Reserve Chairman Jerome Powell said at a central bank meeting late last month: “We are moving our policy stance purposefully to a level that will be restrictive enough to bring inflation back to 2 percent.”

He said that reducing inflation would likely “require maintaining a restrictive policy stance for some time,” adding that “historical evidence strongly cautions against premature policy easing.”

President Biden responded to the report on Tuesday, saying the data “shows more progress in reducing global inflation in the US economy.”

“Overall, prices have been essentially unchanged across our country over the past two months: that’s welcome news for American families, with plenty of work to do,” he said, adding that gasoline prices have fallen, price increases in some grocery stores have slowed and real wages are rising.

He continued, “It will take more time and determination to reduce inflation, which is why we passed the Inflation Reduction Act to reduce health care, prescription drug and energy costs. And my economic plan shows that as we lower prices, we create good-paying jobs and bring manufacturing back to America.

Despite its name, the impact of the “Inflation Reduction Act” is “expected to be statistically indistinguishable from zero,” according to an independent analysis by the Wharton School of the University of Pennsylvania.

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