Inflation, as measured by the Consumer Price Index, fell in April to a year over year rate of 8.3%. That was down from an 8.5% rate in March, raising hopes that the economy had seen the inflation peak. But economists had been projecting a drop to 8.0% in April.

Which left financial markets considering the possibility that while inflation was falling, the pace of the decline would be disappointingly slow.

Also worrisome was an unexpected gain in core inflation, which strips out volatile food and energy prices. Core CPI inflation was up 0.6% in April from March after a 0.3% month to month increase in March.

This led investors to keep their expectations on interest rate increases at the same level as last week. On Wednesday Federal Reserve chair Jerome Powell said that interest rate increases of 75 basis points were not on the table for the Fed’s June and July meetings. So the markets began the week expecting 50 basis points interest rate increases from the Fed at those two meetings. Today’s CPI report didn’t change those expectations. For example, yesterday, according to the CME FedWatch Tool, the odds of a 50 basis point rate increase a the June 15 meeting were 89%. Today the odds were 87.2%.

But what did change is the read on what the Fed will do at its September 21 meeting. The odds of a third 50 basis point interest rate increases from the Fed at that meeting rose, according to the CME FedWatch Tool, to 55.4% from 46.5% yesterday.

As you might expect, stocks weren’t happy at today’s inflation news.

The Standard & Poor’s 500 closed down 1.05% and the Dow Jones Industrial Average lost 1.02% by the end of trading. The tech-heavy NASDAQ Composite took a beating again today with a loss of 3.18%. The small cap Russell 2000 index didn’t do all that much better with a decline of 2.48%.