Bitcoin Rises on Encouraging Inflation News

Bitcoin prices surged on Wednesday after a top Federal Reserve official signaled openness to higher inflation, a development that could lead the U.S. central bank to print more money and debase the dollar.

The price of the digital currency jumped as much as 10% to $11,850 on the news, according to CoinDesk's Bitcoin Price Index.

The move higher comes after New York Fed President John Williams said in a Tuesday night speech that the Fed should allow inflation to "run hot" following years of low inflation.

"Over the past decade, we have seen how low inflation can act as a drag on the economy," Williams said. "We should, therefore, not be afraid to let inflation run a bit above 2% for a while."

The remarks are a shift in tone from the Fed's longstanding view that inflation should be kept in check.

The Fed has a dual mandate of maximum employment and price stability. It has raised rates three times this year and is widely expected to do so again in December.

But with inflation remaining below the Fed's 2% target, there has been a debate within the central bank over whether to change its approach.

Some, like Williams, have argued that the Fed should be more tolerant of higher inflation in order to boost economic growth.

Others, including Fed Chair Jerome Powell, have said they believe the current approach is working and that there is no need to change course.

The debate is likely to continue at the Fed's next meeting on December 18-19.

In the meantime, the rise in Bitcoin prices is a sign that investors are betting that the Fed will ultimately print more money and debase the dollar.

The Fed has already started to do this by announcing plans to buy $60 billion in Treasury bills every month.

The central bank's balance sheet has ballooned to $4.5 trillion from $2.8 trillion in 2021, and it is expected to keep growing.

 Bitcoin, which is not backed by any government, is seen as a hedge against inflation and a way to preserve wealth.

The digital currency has surged this year, more than doubling in price.

The move higher on Wednesday shows that investors believe the Fed's shift in rhetoric could lead to even higher prices.