Bitcoin prices rise to 1-month high after inflation report helps ease Fed concerns

Bitcoin prices rallied sharply today, rising more than 5% as markets reacted to news that inflation eased in November.

The world’s best-known digital currency hit $17,954.90 near 9:30 a.m. EST, CoinDesk figures show.

At this point, it was up about 5.7% after falling below $17,000 early yesterday afternoon, and it was trading at its highest value since early November, additional CoinDesk data shows.

Stocks were also in the green as the major indexes, including the S&P 500 and the Dow Jones Industrial Average, were up for the day, according to Google Finance.

[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]

Inflation cools down in November

The cryptocurrency reached this highest level in more than a month after a US government report showed that the consumer price index for all urban consumers (CPI-U) increased by 0.1% in November.

That number was less than the 0.4% increase experienced in October, and it also fell short of the 0.3% forecast made by economists surveyed by Dow Jones, CNBC reported.

Furthermore, the CPI figure rose 7.1%, before seasonal adjustment, in the 12 months to November. This number also trailed the 7.3% increase predicted by economists in the aforementioned poll, according to CNBC.

Bold expectations

The fact that inflationary pressures eased somewhat last month helped ease concerns about how much Federal Reserve officials will tighten monetary policy in an effort to bring significant price increases under control.

The members of the Federal Open Market Committee (FOMC) are scheduled to announce the outcome of this month’s policy meeting tomorrow afternoon.

Since March, these key policymakers have increased the target range for the benchmark federal funds rate by 375 basis points, making for multiple rate increases of 75 basis points in that time.

Figures provided by the widely cited CME FedWatch Tool around 11 a.m. EST today showed nearly 80% odds that those officials would raise the benchmark interest rate target by 50 basis points at the conclusion of this month’s FOMC meeting.

The data also showed a more than 20% chance of a rate hike of 75 basis points.

The diagram below shows these probabilities:

When the benchmark interest rate rises, it puts upward pressure on broader interest rates, a development that can affect a wide range of risk assets, including cryptocurrencies and stocks.

Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and sol.