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STORY: U.S. inflation accelerated in May with the Labor Department's consumer price index rising 8.6% from a year ago - marking the highest level in more than four decades.

Economists had hoped that the annual CPI rate peaked in April and expected an increase of 8.3% for May.

The stock market plummeted on the news from the Labor Department, which reported Friday that gasoline prices hit a record high and the cost of services rose further, suggesting that the Federal Reserve could continue with its 50-basis-point interest rate hikes through September to fight inflation.

Gas prices were flirting with an average $5 per gallon on Friday, indicating that the monthly CPI would remain elevated in June.

Inflation in May was also boosted by higher prices for other goods like food, surging amid geopolitical conflict and health restrictions in China that dislocated supply chains.

Rent prices, hotel accommodation costs and airline fares were also high last month. There had been hope that the shift in spending from goods to services would help to cool inflation. But a tight labor market is driving up wages, contributing to higher prices for services.

Friday's inflation report was published ahead of an anticipated second 50-basis-point rate hike from the Fed next Wednesday. The U.S. central bank is also expected to raise its policy interest rate by an additional half a percentage point in July.