The Dow Jones Industrial Average plummeted 214 points Wednesday (May 17) after a stronger-than-expected rise in consumer prices in April cut the odds that the Federal Reserve will use its June monetary policy meeting to signal a pause in interest-rate increases.
CBS MarketWatch reported that the consumer price index rose 0.6%. Excluding food and energy prices, consumer prices rose 0.3%. The increase in the CPI and the core rate were both slightly higher than forecast. Economists expected a 0.5% gain in the CPI, according to a MarketWatch survey. The core CPI was expected to rise 0.2%.
“The CPI numbers seemed to have really shaken up people,” said John Forelli, senior vice president and portfolio manager at Independence Investments. “The fear is that inflation may have reignited and that the Fed is going to have to keep raising rates longer than they expected.”
More important, core inflation is now at the top end of the Fed’s comfort zone. The central bank has raised short-term interest rates 16 times in a row over the past two years in a bid to choke off inflationary pressures in the economy.
The CPI report comes just a day after investors cheered a producer-price report showing core wholesale inflation in check.