US consumer price index (CPI) inflation rose by 0.1% for the month and 8.3% annually in August, the Bureau of Labor Statistics reported Tuesday, against economist expectations that headline inflation would fall 0.1% month over month. Core CPI, which excludes volatile food and energy prices, climbed 0.6% from July and 6.3% from August 2021. The increase was 8.5% in July and 9.1% in June, which was the highest inflation rate in four decades. The CPI measures what consumers pay for goods and services.

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How markets are reacting to the CPI report:

US Stock Markets

US stocks opened lower Tuesday after the release of inflation data. The Dow Jones Industrial Average was down 2.05% in early morning trade, the S&P 500 was 2.43% lower and the Nasdaq Composite was down 3.15%.

Treasury yields

Treasury yields rose after the data came in hotter than expected. The two-year Treasury yield was recently 3.741%, from 3.571% at Monday’s close, hitting its highest level since November 2007. The yield on the benchmark 10-year Treasury note was 3.445%, from 3.361%. The yield on the 30-year Treasury bond was up about 4 basis points at 3.55%. Yields move inversely to prices, and a basis point is equal to 0.01%.

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European Stock Markets

European stocks erased tentative gains on Tuesday afternoon after a higher-than-expected US inflation reading for August. The pan-European Stoxx 600 fell 0.4% below the flatline by mid-afternoon, having previously been up more than 0.5%. Retail stocks fell 1.5% to lead losses as most sectors and major bourses slipped into the red.

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Oil prices

Oil prices fell after stronger than expected US inflation figures boosted the dollar on renewed expectations of further aggressive interest rate hikes, potentially curbing economic activity. At 9.10 am Eastern Time, US crude futures traded 0.35 lower at $87.56 per barrel while the Brent contract fell 0.4% to $93.54. US Gasoline RBOB Futures were 0.4% higher at $2.4548 per gallon.

US dollar

The dollar rallied against the yen, euro, and other currencies after stronger-than-expected US inflation data. The dollar index, which tracks the greenback against six peers, was up 1.1% at 109.39, moving toward last week’s two-decade peak of 110.79. The euro, pound, and yen all declined, with the euro last down 1% versus the greenback to $1.0016, after hitting a nearly one-month high of $1.0198 in the previous session.

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Metal prices

Gold and silver prices fell sharply in early trading. In the global markets, gold was 1.38% down at $1,700.00 per oz, while silver was 1.11% lower at $19.56. Platinum was trading at $901.71, while palladium was trading at $2,144.32.

Cryptocurrency

Bitcoin and Ethereum suffered sharp selloffs following the inflation data release. The Bitcoin price fell 0.85% in the last hour to $21.255.88 and Ethereum slipped 0.60% to $1,609.12.

The data prompted further bets from the market that the US Federal Reserve will remain aggressive in its tightening of monetary policy.  

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The CPI inflation report is one of the last pieces of data on inflation the Fed will consider ahead of its September 21-22 meeting, where the central bank is expected to announce its third straight 0.75 percentage point hike in a bid to curb high inflation.

Last week, Fed chair Jerome Powell reiterated that he is “strongly committed” to bringing down inflation, despite concern that continuous aggressive interest rate hikes may put the economy into recession.