Investors dumped shares and the Australian dollar after higher-than-expected US inflation stoked fears the Federal Reserve will have to work harder to defeat price pressures, raising the risk it tips the world's largest economy into recession.P/ASX 200 Index sank more than 2.5 per cent at the open to 6833.7 points, mirroring a rout on Wall Street.The Australian dollar was 2.
The risk of a 1 percentage point rate increase at next week's Fed meeting jumped, dashing hopes of a Fed pivot to a more moderate pace of monetary tightening. “The stickier inflation proves that a higher nominal Fed funds rate is needed to achieve the FOMC’s objectives,” said Mr Martin. Bond futures are fully priced for a 0.25 percentage point lift by the Reserve Bank in October, and imply a one-in-five chance of a larger 0.5 percentage points, taking the cash rate to a peak of 3.8 per cent by May.poll had suggested the monthly CPI rate of change would dip by 0.1 per cent, and year-over-year growth would rise by 8.1 per cent.