The pan-European Stoxx 600 slid 1% lower by mid-afternoon, having previously been up more than 0.5%. Retail stocks dropped 2.5% to lead losses as most sectors and major bourses slid into the red.
U.S. 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, defying economist expectations that headline inflation would fall 0.1% month-on-month. Core CPI, which excludes volatile food and energy costs, climbed 0.6% from July and 6.3% from August 2021.
The reading fueled further bets from the market that the U.S. Federal Reserve will remain aggressive in its tightening of monetary policy. The inflation report was one of the last pieces of data on inflation the Fed will see ahead of its September meeting, where the central bank is expected to deliver its third consecutive 0.75 percentage point rate hike in an effort to combat high inflation.
Fed Chair Jerome Powell reiterated last week that he is “strongly committed” to bringing down inflation, despite concern that persistent aggressive interest rate hikes may tip the economy into recession.