Wall Street roared Wednesday after inflation cooled more than expected last month, sparking speculation the Federal Reserve may not have to be as aggressive about hiking interest rates as feared.

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The S&P 500 was 1.6% higher amid a widespread rally that took off immediately after a report showed the nation’s biggest economic challenge, inflation, slowed to 8.5% at the consumer level last month from 9.1% in June. Technology stocks, cryptocurrencies and other investments that have been the year’s biggest losers due to the Fed’s aggressive rate hikes were some of the morning’s biggest winners.

The Nasdaq composite, which is full of the high-growth and expensive-looking stocks that have been particularly vulnerable to moves in interest rates, was 2.1% higher, as of 10 a.m. Eastern time. Bitcoin rose 4% to top $24,000, and the Dow Jones Industrial Average was up 430 points, or 1.5%, at 33,268.

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Much of July’s slowdown in inflation was due to drops in prices for gasoline and oil. But even after ignoring those and prices for food, which can also swing sharply from month to month, what’s called “core inflation” held steady last month instead of accelerating as economists had forecast.

The data encouraged traders to scale back bets for how much the Fed will raise interest rates at its next meeting. They now see a hike of a half percentage point as the most likely outcome, according to CME Group. A day earlier, they were betting on a hike of 0.75 percentage points, the same as the last two increases.

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Such differences may not sound like much, but interest rates help set where prices go across financial markets. And higher rates tend to pull down prices for everything from stocks to commodities to crypto.

Prices for bonds soared immediately after the inflation report’s release, pulling their yields lower. The yield on the two-year Treasury, which tends to track expectations for the Fed, fell to 3.12% from 3.27% late Tuesday.

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The 10-year yield fell more slowly, down to 2.72% from 2.78%, narrowing how far below it is the two-year yield. Many investors see such a gap as a fairly reliable signal of a coming recession.

Recession worries have built as the highest inflation in 40 years squeezes households and corporations around the world. The Fed and other central banks have been hiking rates to slow the economy in hopes of stamping out inflation, but they risk choking it off if they move too aggressively.

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To be sure, inflation is still high, and the expectation is for it to stay so for a while. But Wednesday’s encouraging data nevertheless rejuvenated Wall Street, which staggered following stronger-than-expected jobs report on Friday that raised expectations for a more aggressive Fed. It bolstered hopes that a peak in inflation — and thus in the Federal Reserve’s most aggressive rate hikes — may be on the horizon.

“This is a step in the right direction but keep in mind we have many miles ahead of us before inflation normalizes,” said Mike Loewengart, managing director, investments strategy, at E-Trade from Morgan Stanley.

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The inflation data helped stocks across Europe climb to modest gains, while markets that closed earlier in Asia were mostly down. Germany’s DAX returned 0.9%, Japan’s Nikkei 225 fell 0.6% and Hong Kong’s Hang Seng lost 2%.