Following statistics suggesting increasing inflation, European and US markets treaded water on Wednesday, while the dollar fell as the Federal Reserve chairman maintained a dovish attitude on monetary policy.

Data from the Producer Price Index showed a 7.3 percent gain for the 12 months ending in June, the highest yearly increase since the Labor Department began measuring it more than a decade ago.

The news comes on the heels of Tuesday’s consumer pricing data, which also showed a significant increase, causing Fed Chair Jerome Powell to remark that inflation was higher than the Fed expected and will stay “elevated” in the coming months.

Powell, on the other hand, stuck to his guns on policy, promising to keep providing stimulus until the recovery is complete.

Powell noted in his semi-annual speech to Congress that the US economy still has “a long way to go” to recover to full employment following the Covid-19 outbreak.

He stated that the Fed “will guarantee that monetary policy continues to give powerful assistance to the economy until the recovery is complete.”

However, the dollar, which had risen in expectation of Powell announcing a timetable for tapering stimulus, fell back.

Meanwhile, the annual consumer price index rate in the United Kingdom rose to 2.5 percent in June, the most since August 2018, according to statistics released Wednesday.

“Inflation is heating up,” stated Markets.com analyst Neil Wilson.

“The Fed and the Bank of England will be hoping that the high readings are the result of a July heatwave caused by portions of the economy that were basically shut down last year.”

Investors are concerned about global inflation, fearing that pent-up demand and skyrocketing prices may push policymakers to hike interest rates sooner than expected, stifling the post-Covid economic rebound.

The counterargument is that recent price increases represent “peak inflation,” which will eventually subside.

Stocks in London declined 0.5 percent. With many French traders away for the Bastille Day holiday, stock indices in Frankfurt and Paris remained steady.

Asian markets had fallen earlier in the day, and oil prices had fallen as a result of US data showing a drop in gasoline demand.