The major stock market indexes tumbled on Tuesday after a key measure of inflation came in worse than expected.

The Dow Jones Industrial Average plunged 900 points, for a 2.8 percent decline. The S&P 500 dropped 3.2 percent, while the Nasdaq Composite fell 4.1 percent.

The drop, which undid a week worth of gains, came after the Bureau of Labor Statistics revealed that the Consumer Price Index (CPI) increased by 8.3 percent in August compared to the same time last year and increased 0.1 percent from the previous month.

The rise was worse than the 8.1 percent increase that economists had expected, according to Dow Jones estimates.

The month-to-month figure also came in worse than expected, with economists having predicted a -0.1 percent change to the CPI but instead the measure increased 0.1 percent.

The overall cost of food jumped 11.4 percent — the highest increase since May 1979. The cost of “food-at-home” was up 13.5 percent year-over-year — the largest increase since March 1979.

Core CPI, excluding volatile energy and food prices, increased 6.3 percent year-over-year and 0.6 percent from the month before.

The new figures raise concern among investors that the Federal Reserve will take an aggressive approach to combatting inflation that could send the U.S. economy into a recession.

The new inflation figures were released just one week ahead of a planned meeting of the Fed on September 20 and 21. It is expected to announce a third consecutive 0.75 percentage point interest rate hike to combat inflation.

Federal Reserve Chairman Jerome Powell said at a central bank retreat late last month: "We are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to 2 percent."

He said decreasing inflation was likely to "require maintaining a restrictive policy stance for some time," adding, "the historical record cautions strongly against prematurely loosening policy."

President Biden responded to the report on Tuesday saying the data "show more progress in bringing global inflation down in the US economy."

"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," he said, adding that gas prices have fallen, some grocery store price increases have slowed down and real wages are up.

He continued: "It will take more time and resolve to bring inflation down, which is why we passed the Inflation Reduction Act to lower the cost of healthcare, prescription drugs and energy. And my economic plan is showing that, as we bring prices down, we are creating good paying jobs and bringing manufacturing back to America."

Despite its name, the impact of the "Inflation Reduction Act" is "expected to be statistically indistinguishable from zero," according to an independent analysis performed by the University of Pennsylvania Wharton School.

THIS BREAKING NEWS ITEM IS PRESENTED BY

Dow Plunges 900 Points after Worse-Than-Expected Inflation Report

The drop, which undid a week worth of gains, came after the Bureau of Labor Statistics revealed that CPI increased ... READ MORE

New From Robert Sirico: The Economics of the Parables

The parables of the New Testament remain ubiquitous, and yet few have stopped to glean wisdom from one of Christ's most frequently addressed subjects: money. In this new book, Rev. Robert A. Sirico uncovers the enduring financial truths and practical lessons found in Christ's parables.

Learn more