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

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Major stock indices slumped on Tuesday, posting the worst one-day performance for stocks since June 2020, after a key measure of inflation came in worse than expected.

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

The drop, which negated a week’s gains, came after the Bureau of Labor Statistics revealed that the Consumer Price Index (CPI) it rose 8.3 percent in August compared to the same period last year and was up 0.1 percent from the previous month.

the raise it was worse than the 8.1 percent rise economists had expected, according to Dow Jones estimates.

The month-on-month figure also came in worse than expected, with economists forecasting a -0.1 percent change in the CPI, but instead the measure rose 0.1 percent.

The total cost of food increased by 11.4 percent: the higher rise since May 1979. The cost of “dining at home” rose 13.5 percent year over year, the biggest increase since March 1979.

Core CPI, excluding volatile energy and food prices, rose 6.3 percent year-over-year and 0.6 percent from the previous month.

The new figures raise concern among investors that the Federal Reserve will take an aggressive approach to fighting inflation that could tip the US economy into a recession.

The new inflation figures were released just a week before a planned Fed meeting on September 20-21. expected to announce a third consecutive interest rate increase of 0.75 percentage points to combat inflation.

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

He said slowing inflation will likely “require maintaining a restrictive policy stance for some time,” adding that “the historical record strongly cautions against premature policy easing.”

President Biden responded to the report Tuesday by saying the data “shows further progress in bringing down overall inflation in the US economy.”

“Overall, prices have been essentially flat in our country these last two months — that’s good news for American families, with more work to do,” he said, adding that gas prices have come down, some increases Prices at grocery stores have slowed. and real wages have risen.

He continued: “It will take more time and determination to bring inflation down, which is why we passed the Reducing Inflation Act to lower the cost of health care, prescription drugs and energy. And my economic plan shows that as we drive prices down, we’re creating good-paying jobs and bringing 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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