The US inflation rate hit 7.9% in February, up from 7.5% the month before, and in line with expectations. Bitcoin (BTC) immediately jumped higher on the news, before later reversing lower again, along with falling stock markets in both Europe and the US. (Updated at 14:48 UTC: updates throughout the entire text)
“The 12-month increase has been steadily rising and is now the largest since the period ending January 1982. The all items less food and energy index rose 6.4 percent, the largest 12-month change since the period ending August 1982,” the US Bureau of Labor Statistics wrote.
At 14:30 UTC, BTC stood at USD 39,080, down by about 0.6% during the first hour after the figure was released, while ethereum (ETH) traded at USD 2,586, seeing a similar percentage loss as BTC.
Meanwhile, the price of gold reversed losses from earlier today, trading nearly unchanged over the same time period to once again move above the key USD 2,000 mark.
In the stock market, the important S&P 500 index opened 1.1% lower on Wall Street at 14:30 UTC, while the European-wide STOXX 600 index was down by 1.88% at the same time.
The US inflation figure was released after the European Central Bank said that its bond purchase program would be reduced sooner than previously expected, citing the inflationary pressures that the war in Ukraine has caused on the European continent.
“The Russian invasion of Ukraine is a watershed for Europe,” the ECB’s statement said.
It added that the central bank will “take whatever action is needed to fulfill the ECB’s mandate to pursue price stability and to safeguard financial stability.”
Notably, the ECB also removed a mention from its statement that said interest rates could go lower than their current level. It added that changes to the interest rate would come “some time after” bond purchases had been phased out completely.
The euro responded to the news by moving up versus the US dollar immediately after the statement was issued, before later turning lower again.
Meanwhile, commenting ahead of today’s release of US inflation figures, Marcus Sotiriou, an analyst at UK-based crypto broker GlobalBlock, said that a fall across all global markets could be seen if inflation in the US continues to come in above expectations.
“A higher than expected reading could lead to a further fall in global markets, as investors may price in aggressive monetary policy from the Federal Reserve. A lower than expected reading may have an opposite effect,” Sotiriou said in a comment shared with Cryptonews.com.
Other analysts, meanwhile, said high inflation has now lasted for much longer than expected.
“We thought that inflation would come down, especially due to the untangling of the global supply chain, but we don’t know how what’s happening in Ukraine will re-tangle that,” Joel Naroff, chief economist at Naroff Economics, told the Wall Street Journal.
A high figure also appears to have been expected from President Joe Biden’s administration. Speaking at a press briefing yesterday, White House Press Secretary Jen Psaki said yesterday they “[…] expect to see a high headline inflation in tomorrow’s February inflation data,” with “a key reason” being higher energy prices.
‘Working hard’ on digital euro
Also, speaking at a press conference following the announcement, ECB President Christine Lagarde said that work on a digital euro – the planned central bank digital currency (CBDC) for the euro area – is something she is “working hard” to push forward.
I am happy that “attention is now focused on the role that cryptos can play,” Lagarde said, adding that she welcomed the Executive Order on crypto in the US that was signed by President Biden yesterday.
“I think we have to be a little bit ahead of the curve on that front,” Lagarde said about the development of a digital euro, noting that a formal decision to launch a CBDC will be taken by the ECB’s Governing Council later.
– Ukraine War: How Russian Aggression Could Derail the Fragile World Economy
– With War Starting and Markets Dropping, Questions Multiply About Central Banks’ Policies
– As Inflation Is Here to Stay, Bitcoin, Ethereum, and Gold Investors Will Win, But Brace for Volatility – BitMEX
– Supply Disruptions Add to Inflation, Undermine Recovery in Europe