US markets sink on unexpectedly high inflation

Prices rose 8.3 percent in the 12 months through August, the Labor Department said, which was faster than the 8.1 percent that economists had expected.

That was down from 8.5 percent in July, driven by lower petrol costs, BBC reported.

The Dow Jones Industrial Average sank nearly four percent, the S&P 500 dropped 4.3 percent, and the Nasdaq plunged more than five percent.

It marked the steepest day of declines since June 2020.

In a statement Tuesday, US President Joe Biden focused on the improvement saying, "Overall, prices have been essentially flat in our country these last two months: that is welcome news for American families, with more work still to do."

Speaking to reporters en route to Delaware later in the day, the Democratic president said he was not concerned about the latest inflation report.

However, the costs of food, housing and medical care continued to surge, disappointing investors, the BBC said in its report.

The cost of groceries in the US jumped 13.5 percent in the 12 months to August, while housing costs climbed 6.2 percent and medical care rose 5.6 percent.

Energy costs - one of the big drivers of inflation - also remain far higher than a year ago, despite dropping sharply in the past two months, falling more than 10 percent from July to August, the Labor Department said.

Overall the consumer price index, which tracks goods and services across the economy, was up 0.1 percent from July to August, as the fall in petrol costs was offset by increases in other areas.

By making borrowing more expensive, the hikes are intended to cool demand from households and businesses, helping to reduce some of the pressures pushing up prices.

The Fed is widely expected to announce another large increase this month, a move analysts said was all but confirmed by the latest report, the BBC said.