US inflation rate comes in at 6%, meets expectations; Bitcoin price climbs above $25,000

• The Consumer Price Index (CPI) declined to 6.0% year on year from February 2023's 6.4%.
• The upcoming FOMC meeting is expected to result in a 25 basis points hike in interest rates.
• The crypto market reacted positively to the inflation rate as Bitcoin price climbed to trade at $26,382.

The Consumer Price Index (CPI) declined to 6.0% year on year. On a monthly basis, the CPI was up by 0.4%, as per estimates. The US Bureau of Labor Statistics reported on Tuesday that the core CPI, which is a measure of the inflation rate that excludes the volatile food and energy prices, rose by 0.5% on a monthly basis, bringing the yearly rate down to 5.5% from 5.6%.

The CPI for the month met the forecasts, which is expected to keep the Federal Reserve committed to bringing down inflation to its 2.0% target. 

As for what can be expected going forward from the Federal Open Market Committee (FOMC), the market gauges suggest a 25 basis points (bps) hike to be still on the cards. 

Some investors still also consider a 50 bps hike as possible. This is in line with what the Federal Reserve Chair Jerome Powell stated in his Congressional testimony last Tuesday when he said,

"The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated.

However, following the recent bank crisis, which resulted in the shuttering of Silicon Valley Bank and Signature Bank, some experts are saying this could keep the FOMC from raising the interest rates significantly during the next meeting from March 21-22 and meet traders' expectations of a 25 bps hike.

Adding to the same FXStreet Lead Analyst, Eren Sengezer stated,

"The data from the US showed on Tuesday that the Core Consumer Price Index (CPI) remained sticky in February, arriving at 0.5% on a monthly basis and surpassing the market expectation of 0.4%. Although this reading revived expectations for a 25 basis points Federal Reserve rate hike at the upcoming meeting and provided a boost to the US Dollar with the initial reaction, risk-sensitive assets remain resilient. Easing fears over the collapse of Silicon Valley Bank turning into a deeper crisis impacting bigger financial institutions seem to be fueling a risk rally. 

The crypto market makes a move for the better

With the year-on-year inflation rate coming down to 6.0%, the crypto market reacted positively, with Bitcoin price rising to trade at $26,382. The immediate reaction to the CPI data shows that investors had been expecting CPI to decline by 0.4% MoM. Lower inflation is positive for BTC because it generally weakens the US Dollar, the reserve currency in which Bitcoin is priced in.

BTC/USD 1-hour chart

Ethereum signalled a similar increase as the second-largest cryptocurrency shot up by 4.3%, exchanging hands at $1,763. Other large-cap altcoins observed no change in price momentum. Cardano stood at $0.3611, up by 5.29% in the last hour. XRP could be seen trading at $0.3837, and MATIC noted a 5.64% rise as well to trade at $1.23.

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