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Headline Consumer Price Index inflation in May rose to a new annual high rate of 8.6% in May, the Bureau of Labor Statistics reported today, June 10.

Headline prices rose 1% from April.

The big drivers were, as expected, food (with prices up at a 10.1% annual rate) and energy.

The core CPI, which strips out food and energy prices, rose 0.6% in May from April and at a 6% annual rate.

The bad news in this morning’s economic wasn’t limited to price inflation. Inflation-adjusted average hourly earnings fell 3% in May from a year earlier, the biggest drop since April 2021 and the 14th straight decline. Consumer sentiment, as tracked by the University of Michigan, plunged in early June to the lowest level on record. In that poll expectations for future inflation rose.

Stocks fell on the news with the Standard & Poor’s 500 down 2.91% at the close. The Dow Jones Industrial Average ended lower by 2.73%. The NASDAQ Composite closed off 3.52% and the NASDAQ 100 ended down 3.56%. The small cap Russell 2000 index closed down 2.73%.

The iShares MSCI Emerging Markets ETF (EEM) finished lower by 1.11%.

It wasn’t just the 8.6% increase in inflation that sent the market lower. Wall Street keeps looking for inflation to peak and many on Wall Street had convinced themselves that inflation would drop from the April 8.3% annual rise in the CPI.

So today was a crushing disappointment for those expecting a peak in May.

And do I need to say this? The numbers virtually guarantee a 50 basis point increase in interest rates when the Federal Reserve meets next Wednesday, June 15.