On Tuesday afternoon, Bitcoin crossed the $26,000 mark for the first since last Summer following the latest CPI report that indicated inflation in the United States was still alive.
The Bureau of Labor Statistics reported Tuesday that the Consumer Price Index (CPI) increased 6.5% in the last 12 months. The report aligned with the expectations of many economists.
Data from CoinGecko shows Bitcoin and Ethereum surged 6% and 5% to $26,250 and $1,775, respectively. Other coins like Solana and Dogecoin also posted significant gains.
Since setting a 40-year high of 9% in June 2022, inflation has indicated signs of easing but still remains far above the Fed’s target of around 2%.
The CPI Report
The latest CPI report shows prices increased by 0.5% last month from January. The biggest monthly gains to Consumer Price Index came from recreation services, shelter, and food.
Notably, Shelter prices went up 0.8% in February from January, an 8% surge from a year ago. Meanwhile, Energy prices dropped 0.7% last month after rising by 2.1% in January.
To put inflation under control, the Fed has been hiking interest rates, making it costly for consumers and businesses to borrow. In March 2022, the central bank took interest rates from near zero to around 4.50%, the highest since 2007.
Last December, the regulator projected that these rates would go as high as 5.2% in 2023. Furthermore, earlier this month, Fed Chairman Jerome Powell suggested that the interest rates could be higher than what was estimated in December.
Will the Fed Hike Interest Rates Next Week?
Last week, Silicon Valley Bank collapsed partially due to high interest rates. For this reason, economists say the Fed is unlikely to hike interest rates next week despite yesterday’s CPI report showing increased inflation.
Further, the surge in crypto prices signals that investors are convinced that the central bank will not hike interest rates by 50 basis points. According to the CME FedWatch Tool, the possibility of the Fed increasing rates by 25 basis points solidified at 87%.