European Central Bank and Bank of Canada Cut Interest Rates: Impact on Crypto Market

The European Central Bank (ECB) and the Bank of Canada (BoC) have cut interest rates, marking a crucial change in monetary policy.

The European Central Bank lowered its key interest rate from 4% to 3.75%, a decision expected by the markets despite persistent inflationary pressures in the euro zone. Meanwhile, the Bank of Canada lowered its key interest rate from 5% to 4.75%, becoming the first G7 country to do so in the current session.

The European Central Bank and the Bank of Canada cut interest rates

The ECB's decision, influenced by updating inflation expectations, reflects the need for moderate monetary policy after a period of fixed interest rates. The ECB's latest forecasts show a slight rise in inflation expectations for 2024 and 2025, with 2026 remaining stable at 1.9%.

Christine Lagarde, President of the European Central Bank, said: statement“Based on an updated assessment of inflation expectations, underlying inflation dynamics and the transmission strength of monetary policy, it is now appropriate to ease the degree of policy tightening monetary policy after nine months of maintaining stable interest rates."

This drop is the first since September 2019 and comes after a series of increases that started later than other central banks. But this now puts the European Central Bank in the lead in lowering interest rates.

On the other hand, the reduction in interest rates by the Bank of Canada aims to ease the burden on over-indebted consumers. Gov. Tiff Macklem stressed that future reductions will depend on whether trends continue. Inflation Bearish.

The Board of Directors of the Bank of Canada declared in... statement "The Governing Council closely monitors developments in underlying inflation and remains particularly attentive to the balance between supply and demand in the economy, inflation expectations, wage growth and pricing behavior of companies."

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These interest rate cuts have several implications Cryptocurrency market. Low interest rates generally reduce borrowing costs, encouraging consumer spending and business investment. This increased liquidity could boost investments in high-yielding assets, including cryptocurrencies. Additionally, low returns on traditional savings could push investors toward riskier assets such as cryptocurrencies.

Additionally, falling interest rates may cause cryptocurrency prices to rise. With safer investments offering lower returns, investors often seek higher returns in the cryptocurrency market. This change could lead to increased demand for digital assets, which could lead to an increase in their value.

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However, the measures taken by the European Central Bank and the Bank of Canada are accompanied by caution. Both institutions say future cuts will depend on data, underscoring a cautious approach in an uncertain economic context. Economists suggest the ECB could wait until September to make another cut, while the Bank of Canada could act again in July.