WASHINGTON – Higher prices across the economy raised concerns of inflation with economists and prompted sell-off on Wall Street, sending the Dow Jones Industrial Average down more than 200 points in intraday trading Wednesday.
Prices on all goods and services, as read in the Labor Department’s Consumer Price Index, increased as seasonally adjusted 0.6 percent in April. Taking away food and energy goods, the core index increased by 0.3 percent.
“The news is not good,” said Edward Leamer, director of the UCLA Anderson Forecast. “Those inflation numbers seem like they’re more and more troubling.”
The Federal Reserve, which recently raised its benchmark federal funds interest rate to 5 percent, said it would be watching indicators, such as the CPI, to gauge whether further increases were needed.
“The Fed is between a rock and a hard place here,” said Leamer. “The rate increase they’ve already put into place already killed off the housing market.”
Higher interest rates can slow overall economic growth, curtailing job creation and depressing consumer spending. Increased prices also mean that the consumer’s dollar won’t go as far.
For complete coverage, see tomorrow’s WWD.