Bitcoin jumped above US$19,000, its highest level since November 2022, as US inflation fell to 6.5%, raising analysts' expectations that the Federal Reserve will increase interest rates by only 0.25% at its meeting later this month.
According to CoinMetrics, the price of Bitcoin soared 8.4% to $19,013 on Jan 13.
The price hit its highest level in more than two months after the US posted a slowdown in the consumer price index (CPI) in December. This should encourage the US central bank to slow the pace of interest rate increases, said analysts.
The US Labor Department said headline CPI, which includes food and energy prices, rose by 6.5% in December from a year earlier. That slowed from a 7.1% increase in November and was the smallest gain since October 2021. The figures are in line with analysts' expectations.
Headline CPI posted a month-on-month decline of 0.1% in December, in line with analysts' expectations, and the first drop in more than two-and-a-half years. Core CPI, which excludes food and energy, rose by 5.7% year-on-year, declining from a 6% increase in November, in line with expectations.
The slowdown in CPI eased investor concerns about the Fed's rate hikes after risky assets, including cryptocurrencies, had previously rallied, according to analysts. Such assets have been heavily pressured by the Fed's rate moves.
Following the CPI figures, analysts indicated higher confidence the Fed would raise interest rates by only 0.25 percentage points to 4.50-4.75% at its next meeting scheduled for Jan 31 and Feb 1.
Kiatnakin Phatra Research (KKP) said if inflation continues to dip towards the Fed's target, there is a chance the central bank may adjust its monetary policy stance going forward.
However, given tight labour market data, there is a risk of prolonged high inflation in the service sector, said the research house. KKP expects the Fed to maintain its hikes until interest rates are at 5%.