Inflation in the United States increased to 7.9% in February, up from 7.5 percent the previous month and in line with expectations. On the announcement, Bitcoin (BTC) soared higher, before turning lower, along with sliding stock markets in Europe and the United States. (At 14:48 UTC, revisions were made to the full text.)
“The 12-month increase has been steadily increasing and is now the highest since January 1982.” The all-items index, excluding food and energy, increased by 6.4 percent, the highest 12-month jump since August 1982, according to the US Bureau of Labor Statistics.
BTC was trading at USD 39,080 at 14:30 UTC, down roughly 0.6 percent in the first hour after the data was revealed, while ETH was trading at USD 2,586, down about the same proportion as BTC.
Meanwhile, gold prices reversed earlier today’s losses, trading practically steady over the same time period to reclaim the important USD 2,000 barrier.
At 14:30 UTC on Wall Street, the crucial S&P 500 index was down 1.1 percent, while the European-wide STOXX 600 index was down 1.88 percent.
The US inflation statistic was issued after the European Central Bank announced that it would reduce its bond-buying program sooner than expected, citing inflationary pressures on the European continent caused by the Ukraine conflict.
“The Russian invasion of Ukraine is a watershed for Europe,” the ECB’s statement said.
The ECB will “take whatever action is necessary to fulfill the ECB’s mandate to pursue price stability and safeguard financial stability,” according to the statement.
Notably, the ECB deleted from its statement a suggestion that interest rates could go lower than they are now. It went on to say that interest rate increases will come “some time after” bond purchases were totally phased out.
The euro reacted to the news by first rising against the US dollar after the statement was released, before falling again later.
Meanwhile, ahead of today’s release of US inflation numbers, Marcus Sotiriou, an analyst at UK-based crypto broker GlobalBlock, stated that if inflation in the US continues to come in over predictions, a drop across all worldwide markets might be witnessed.
“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.
Meanwhile, other analysts claim that strong inflation has now lasted far longer than projected.
“We thought inflation would come down, especially due to the untangling of the global supply chain,” Joel Naroff, chief economist at Naroff Economics, told the Wall Street Journal. “But we don’t know how what’s happening in Ukraine will re-tangle that.”
President Joe Biden’s administration also appears to have been anticipating a high figure. White House Press Secretary Jen Psaki said yesterday that they “[…] expect to see a high headline inflation in tomorrow’s February inflation data,” with increasing energy prices being “a key reason.”
On the digital euro, we’re ‘working hard.’
ECB President Christine Lagarde also stated at a news conference following the announcement that work on a digital euro – the intended central bank digital currency (CBDC) for the euro area – is something she is “working hard” to advance.
I am pleased that “attention is now focused on the role that cryptos can play,” Lagarde said, adding that she applauded President Biden’s signing of an executive order on crypto in the United States yesterday.
“I think we have to be a little bit ahead of the curve on that front,” Lagarde said of the establishment of a digital euro, adding that the ECB’s Governing Council will make a formal decision to launch a CBDC later.
