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Consumer prices fell slightly in December, with Bitcoin and other cryptocurrencies holding out in hopes of smaller interest rate hikes from the Federal Reserve.

The Bureau of Labor and Statistics said Thursday that the consumer price index (CPI) rose 6.5% in the 12 months to December, a decline from 7.1% in November. Analysts expected the index, which tracks price movements across a wide range of goods and services, to show inflation easing to 6.5% year-on-year.

Bitcoin posted remarkable gains pending the report’s publication and after, increasing 5% from the day before $18,275according to data from CoinGecko.

Ethereum rose 5% also to $1401 and other altcoins, such as Cardano and Polkadotrose to 3.8%.

“The market seems to be interpreting this as dovish, for the most part,” said CoinShares head of research James Butterfill Decrypt. “From a crypto perspective, this is likely to be supportive as well”

Major stock indexes also reacted positively to the report, a worrying sign of similarity between crypto and traditional markets, said Laguna Labs CEO Stefan Rust.

“It is a worrying trend to see Bitcoin moving in lockstep with traditional financial indicators and stock markets,” he said. “As we know, Bitcoin was founded to be an alternative financial system to Wall Street, and it feels like we may be losing our way.”

The month-on-month rate of inflation showed that prices fell 0.1% in December, after rising 0.1% in November and 0.4% in October. The decline was partly attributed to a month-on-month decline in the price of petrol and heating oilwhich fell 9.4% and 16.6%, respectively.

Core CPI, a measure of inflation that excludes volatile food and energy prices, ticked up a little with 0.3% in December to 5.7% year-on-year, in line with analysts’ expectations.

The annual rate of inflation has fallen steadily since peaking at 9.1% last June, which was the index’s biggest 12-month run in 40 years. However, inflation remains well above the Fed’s target of 2% annually.

To bring sky-high rates under control, the Fed raised its benchmark interest rate seven times last year from near zero to between 4.25% and 4.5%. By raising interest rates, the Fed makes it more expensive for businesses and consumers to borrow, thus cooling the economy.

When interest rates rise, investors typically flee riskier assets such as stocks and crypto for the guaranteed returns offered by more conservative assets such as US Treasuries, with so-called risk-free returns due to government support.

After raising interest rates by 75 basis points for four consecutive policy meetings, the US central bank showed signs of easing off the gas in December when it delivered a 50 basis point rate hike.

Expected prices to rise in February

Thursday’s inflation report is likely to feed into the central bank’s next policy meeting in February, where the Fed is expected to raise interest rates again. But the Fed also takes into account other economic factors, such as the strength of the US labor market, when making decisions.

The Fed has essentially walked a tightrope as it aims to contend in a decade-high inflation battle. By acting too modestly, inflation can be entrenched in the financial system, but if the Fed raises interest rates too aggressively, it can tip the economy into recession.

However, analysts are more convinced that the Fed will continue its softer approach to rate hikes after Thursday’s CPI report. The odds of the Fed raising interest rates by a quarter percentage point compared to half a percentage point rose to 94% from 76% the day before, according to CME FedWatch Tool.

“I think they will probably go up 50 basis points and stay on course for now,” claimed Butterfull of CoinShares. “Remember that what the Fed should do and what they want to do are different things.”

At an event hosted by Sweden’s central bank, Sweden’s Riksbank, Fed Chairman Jerome Powell acknowledged that rate hikes are painful but said they are essential to maintaining the economy’s long-term health, according to CNN Business.

“Price stability is the foundation of a healthy economy and provides the public with immeasurable benefits over time,” he said. “But restoring price stability when inflation is high may require measures that are unpopular in the short term.”