The broad S&P 500 index fell 4.3 percent.
More than 490 stocks on the index closed in the red, reports CNBC.
The Dow Jones industrial index lost 3.9 percent and the technology-heavy Nasdaq composite index plummeted 5.2 percent.
The technology sector had a dark stock market day.
Facebook owner Meta fell 9.4 percent and Google's parent company Alphabet lost 5.9 percent.
Amazon plummeted 7.1 percent, while Apple and Microsoft fell 5.9 and 5.5 percent, respectively.
The inflation figure for the month of August was higher than analysts had expected.
At an annual rate, it meant inflation in August of 8.3 percent.
Analysts had expected 8.1 percent.
Tuesday's figure was also the last for the US central bank to take a position on before it comes out with a new interest rate statement next week.
From the market's point of view, one expects a triple increase, i.e. 0.75 percentage points, of the key interest rate.