In an environment where most major developed market central banks are taking aggressive action to bring inflation down, risk assets are likely to remain volatile and struggle to sustain rallies.

NEW YORK, June 10 (Xinhua) — Wall Street’s major averages fell noticeably for the week as a hotter-than-expected U.S. inflation report amplified fears of a recession.

For the week, the Dow dropped 4.6 percent, the S&P 500 decreased 5.1 percent and the tech-heavy Nasdaq tumbled 5.6 percent.

All three major indexes booked a second straight week of declines and their biggest weekly losses since January, according to Dow Jones Market Data.

The pullback came as the latest U.S. inflation readings have raised worries about the Federal Reserve’s ability to cool prices without inducing a recession.

The U.S. Labor Department reported Friday that U.S. consumer price index (CPI) rose 1.0 percent in May, above the 0.7 percent consensus, for an 8.6 percent year-on-year increase. The May CPI was the largest 12-month increase since the period ending December 1981.

Year-on-year inflation in April was 8.3 percent and 8.5 percent in March.

The pace accelerated relative to prior month, “increasing risks of a recession, as the Federal Reserve may have to take greater measures to tackle inflation,” analysts at J.P. Morgan said Friday in a note.

“The higher than expected inflation data will keep pressure on the Fed heading into next week’s FOMC (Federal Open Market Committee) meeting,” said Brian Rose, senior economist at UBS Chief Investment Office.

“Another 50 basis point rate hike appears inevitable, and the market is even pricing in some chance of a 75 basis point hike,” Rose added.

In its May meeting, the Fed raised interest rates by 50 basis points and signaled more hikes ahead in an effort to combat surging inflation.

Also weighing on the market this week were a slew of downbeat economic data.

The University of Michigan reported Friday that its June preliminary reading of consumer sentiment index came in at 50.2, down 14 percent from the May final, and well below market forecasts of 58.

Elsewhere, the U.S. Labor Department said Thursday that the nation’s initial jobless claims, a rough way to measure layoffs, jumped by 27,000 to 229,000 in the week ending June 4, hitting the highest level in five months.

As uncertainty remains regarding the macroeconomic outlook, experts cautioned that investors should be prepared for continued volatility.

“In an environment where most major developed market central banks are taking aggressive action to bring inflation down, risk assets are likely to remain volatile and struggle to sustain rallies,” said analysts at UBS.

“This dynamic should persist until there is clear indication that inflation is trending lower, which may not occur until well into the second half of the year,” they added.