On Tuesday, the government said inflation ticked up 0.1% from July to August and 8.3% from a year ago, which was down from June’s four-decade high of 9.1%

But excluding the volatile categories of food and energy, so-called core prices jumped by an unexpectedly sharp 0.6% from July to August, after a milder 0.3% rise the previous month. The Fed monitors core prices closely, and the latest figures heightened fears of an even more aggressive Fed and sent stocks plunging, with the Dow Jones collapsing more than 1,200 points. 

The core price figures solidified worries that inflation has now spread into all corners of the economy.

“One of the most remarkable things is how broad-based the price gains are,” said Matthew Luzzetti, chief U.S. economist at Deutsche Bank. “The underlying trend in inflation certainly has not shown any progress toward moderating so far. And that should be a worry to the Fed because the price gains have become increasingly demand-driven, and therefore likely to be more persistent.”

Demand-driven inflation is one way to say that consumers, who account for nearly 70% of economic growth, keep spending, even if they resent having to pay more. In part, that is because of widespread income gains and in part because many Americans still have more savings than they did before the pandemic, after having postponed spending on vacations, entertainment, and restaurants.