The financial markets’ reaction to the US consumer inflation news of September 13 provides an extreme example of how surprising news plays in the day-to-day movements of share prices, interest and exchange rates.

The key global equity benchmark, the S&P 500, lost almost 5% of its opening value after the announcement that inflation was slightly higher than expected in August. This implies that the US Federal Reserve, which sets short-term interest rates, will be more aggressive in its anti-inflationary resolve, making a recession inevitable and more severe...

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