CPI Inflation Rate Shock Jolts Fed Policy Outlook

The consumer price index came in hotter than expected in May, as the CPI inflation rate eclipsed March's 40-year peak.

Following Thursday's stock market rout, the Dow Jones fell sharply after the CPI report..

which shifted Wall Street expectations to half-point Fed rate hikes at the next three or even four meetings.

The CPI rose 1% from the prior month and 8.6% from a year ago, compared to inflation rates of 8.3% in April and 8.5% in March.

The core CPI, which strips out volatile food and energy categories, rose 0.6% from April.

Still, the annual core inflation rate eased to 6% from the prior month's 6.2% reading.

March's 6.5% core inflation rate was the highest since August 1982.

Economists expected the overall CPI to rise 0.7% on the month as the annual CPI inflation rate slipped to 8.2%. The core CPI was seen rising 0.5% vs. April and 5.9% from a year ago.