Published on 26 Feb 2024 on Zacks via Yahoo Finance

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Fresh inflationary worries have sparked volatility in the U.S. stock market. Due to an unexpected rise in the Consumer Price Index (CPI), which is the most accepted gauge for retail inflation followed by the Producer Price Index (PPI) or wholesale prices for January, investors fear a further delay in the much-awaited interest rate cut by the Federal Reserve.

The Bureau of Labor Statistics reported that both CPI and PPI rose 0.3% in January against Wall Street’s expectations of 0.2% and 0.1%, suggesting a change in the inflation trend. The Fed has kept the key interest rate at its highest level since 2001, in the range of 5.25-5.5%, to achieve its ambitious 2% inflation target.

By maintaining high interest rates, the Fed wants to slow down the overall economy. High interest rates make borrowing money more expensive for corporations. Such moves impact performance and, thereby, stock prices.