US stock markets experienced significant declines on Wednesday following the release of higher-than-expected inflation data for March.

The Dow dropped by 534 points (1.4%), the S&P 500 fell by 1.2%, and the Nasdaq Composite declined by 1.1%.

The latest Consumer Price Index (CPI) data revealed a 3.5% increase in consumer prices over the past 12 months, up from February’s 3.2% rate and marking the highest annual gain in six months.

While factors like gas and shelter costs contributed to the monthly increase, prices rose across most major categories.

Investors are concerned that the unexpectedly high inflation report will delay the Federal Reserve’s anticipated rate cuts this year, CNN reported.

When the Fed indicates higher interest rates, markets typically decline as borrowing costs for companies rise, making other investments more attractive compared to stocks.

The probability of an interest rate cut at the Fed’s June meeting has decreased significantly, with just 15% of investors expecting a cut, down from 56% previously.

Similarly, about 60% of investors believe rates will remain unchanged at the July meeting, a notable increase from previous expectations.

Written by B.C. Begley