Consumers will have to pay higher prices to buy various goods in June as inflation continues to worry so much that it leads to indications that the U.S. economy remains slow based on a report released by the Department of Labor Statistics just now.
The consumer price index, a broad measure of everyday goods and services, jumped 9.1% from a year ago, exceeding the Dow Jones ’estimate of 8.8%. That marked another month of the fastest inflation since December 1981. Regardless of volatile food and energy prices, the core CPI rose 5.9%, from an estimated 5.7%.
On a monthly basis, the CPI or CPI readings increased 1.3% and the core CPI increased 0.7%, compared to estimates of 1.1% and 0.5%, respectively.
The futures stock market recorded a fall with the Dow Jones Index falling 100 points, or 0.98%. The S&P 500 futures fell 1.46% and the Nasdaq 100 futures fell 2.13%. The US dollar index, which measures the US dollar against six major currencies, traded 0.32% stronger at 108.252.
“The market is expecting that June will be a new peak,” said Lindsey Bell, head of markets and financial strategists. He added that the reading may confirm what was reported by the jobs report on Friday that the Fed will stick to their stance to tighten policy with aggressive rate hikes as planned. "
The possibility of this high reading could prompt the central bank to raise another 75 basis points during this month’s meeting. Last month, the Fed raised its benchmark interest rate three-quarters from a percentage point to a range of 1.5% -1.75% in the most aggressive increase since 1994.
“The Fed’s credibility will be tested in the coming months with the release of inflation and corporate earnings figures,” said Andy Sparks, head of portfolio management research at MSCI. He added that the Fed's recent aggressive move to lower inflation also faced significant risks as it could push the economy into recession and the signs were already there. Investors on Wednesday continued to monitor second-quarter earnings for clues on the company's health. U.S. companies Shares of Delta Air Lines fell 3.5% in pre-market trading after posting mixed results. Major banks including JPMorgan and Morgan Stanley are scheduled to release results on Thursday.
