(Bloomberg) -- Cryptocurrencies surged on Wednesday after a softer-than-expected inflation report, with Ethereum leading the pack with a greater-than-7% gain. 

Ether’s native token, the second-largest cryptocurrency by market capitalization, rose around 8% to trade at $1,828 as of 10:17 a.m. in New York. Bitcoin added 3.5% to $23,950, and other altcoins like Polkadot and Avalanche also rallied, up 6% and 8%, respectively. An index of 100 of the largest digital assets was up 4.4%. 

The easing consumer-price pressure spurred speculation that the Federal Reserve could pivot to a less-aggressive pace of rate hikes, something that could potentially create a more comfortable environment for risky assets including cryptocurrencies.

“The CPI report should mean the Fed will be less aggressive. A less-aggressive Fed should be bullish for the cryptos,” Matt Maley, chief market strategist at Miller Tabak & Co. “I’m surprised they’re not rallying more.”

The consumer price index increased 8.5% in July from a year earlier, cooling from the 9.1% June advance that was the largest in four decades. Prices were unchanged from the prior month.

While the CPI report reduced some investors fears of further Fed hikes at a 75 basis-point clip, crypto markets have been rebounding off their lows prior the report, along with the stock market. Bitcoin and equities have strongly correlated over the past year.

Nevertheless, many market-watchers said Fed officials could still be a long way from achieving their inflation goals. 

“Today’s exuberance is an example of fast money going risk-on thinking we are on the path to recovery. We may see a bear rally for the time being, but the yield curve is a better barometer of where we’re at, and it’s inverted,” said Steven McClurg, co-founder and CIO at digital asset fund manager Valkyrie Investments, referring to a bond-market metric that indicates the risk of ann economic slowdown. “We are still in the beginning stages of recession.”

Ether, at its highest level since early June, has become a digital-asset market darling, as the highly-anticipated Merge, which will transition its verification protocol from Proof of Work to Proof of Stake, is nearing after years of delays.

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