Dow Plunges as U.S. Inflation Rate Hits 40-Year High

The stock market extended an end-of-week selloff on Friday after the Labor Department reported inflation unexpectedly returned to record highs last month—feeding concerns that the Federal Reserve may embark on a more aggressive campaign to temper rising prices, even if it risks stunting economic growth.

The Dow Jones Industrial Average plunged 880 points, or 2.7%, to 31,392 on Friday, and the S&P 500 fell 2.89% and the tech-heavy Nasdaq 3.5%; for the week, the indexes fell 5%, 5.7% and 7%, respectively.

The government’s official consumer price index rose 8.6% year-over-year in May, its highest level since 1981.

The central bank is expected to announce a half-percent interest rate hike next week, but based on this news it could decide to go higher.

The move would be historic — the last time the Fed delivered a 75 basis point hike was in November of 1994, nearly three decades ago.