US inflation has grown more strongly than expected, putting more pressure on the US Federal Reserve to hike interest rates aggressively.
The consumer price index increased 9.1% year on year in June, the biggest increase since November 1981.
Analysts had been expecting a rise form the May figure of 8.6%, but only to 8.8%.
The core index slipped from 6% to 5.9%, but this was higher than the forecast 5.8%.
The month on month rise was 1.3%, up from 1% in May. The concensus was for a 1.1% increase.
The increase was broad-based, with the indexes for gasoline, shelter, and food being the largest contributors, said the US Bureau of Labor Statistics.
Analysts believe a 100 basis point rise in interest rates, rather than 75, could now be on the cards at the Fed's meeting at the end of this month.
The benchmark Federal funds rate is currently in a range of 1.5% to 1.75% after last month's 75 basis point increase.
Naeem Aslam, chief market analyst at Avatrade, said: "The inflation reading has blown past all expectations today and there is no doubt now that the Fed will be even more aggressive. Inflation at 9.1% makes you sick as a consumer and as a central banker and that is the summary of today’s reading."
Alastair George, chief investment strategist at Edison Group, said: "Today’s CPI report shows US inflation meaningfully above consensus expectations at 9.1%, defying recent hopes for a rapid decline in US inflationary pressure. Market interest rate expectations have surged in response, with interest rate futures now pricing in a US Fed Funds rate of over 3.5% by year-end."
US markets, which were heading higher before the figures, have now gone sharply into reverse.
Futures for the Dow Jones Industrial Average are now down 348 points or 1.12%, the S&P 500 is off 1.65% or 63 points while the Nasdaq Composite has fallen 2.14% or 252.5 points.
The FTSE 100, which was down around 35 points before the US data, is now down 60.51 points or 0.85% at 7149.35.
The dollar index has risen 0.3% to 108.4.
And the pound is now down 0.30% at US$1.1839 having earlier hit US$1.1947.