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Crypto, does the drop in ECB interest rates bring favorable winds?
4h00 ▪ 3 minute read ▪ by Fenelon L.
In an unexpected turn of events, the European Central Bank announced a 0.25% cut in its benchmark interest rates, raising hopes for similar monetary easing by the US Federal Reserve. This decision could breathe new life into the cryptocurrency market.
The ECB relaunches the debate on the direction of rates
The highly anticipated meeting of the European Central Bank (ECB) surprised the financial markets. Against all expectations, the Frankfurt institute has decided to lower its own key interest rates by 0.25%, marking the first reduction since 2019.
This announcement It comes after a prolonged period of aggressive rate hikes aimed at curbing runaway inflation in the Eurozone. Although prices remain high, especially for services, the ECB believes it has made significant progress in combating soaring costs.
The ECB lowered interest rates on main refinancing operations, marginal lending facilities and deposits at the central bank to 4.25%, 4.50% and 3.75% respectively. This strong signal sends a clear message to the markets and could therefore inspire the US Federal Reserve.
Thanks to these efforts, overall inflation it fell to 2.6% last month, even as service prices remain stubbornly high. The ECB’s decision immediately energized crypto assets, with Bitcoin up 0.80%.
All eyes are now on the Fed!
After the bold move by the ECB, all eyes are now on the highly anticipated meeting of the Federal Open Market Committee (FOMC) next week.
Investors will be watching closely for any signals about the future direction of US monetary policy, hoping for an easing similar to that announced by Frankfurt.
although the Federal Reserve has remained cautious so far, underlining the need to remain vigilant against persistent inflation, markets are hoping for a pause in the cycle of rate hikes, or even gradual reductions in the coming months. Such a decision would provide relief to investors who have been strained by this year’s aggressive monetary tightening.
Upcoming key economic data from the United States, including this Friday’s highly anticipated jobs data and next week’s Consumer Price Index (CPI), will attract particular attention from market participants. These statistics could heavily influence the Fed’s balance between fighting inflation and supporting growth.
If the American central bank were to follow the ECB’s example and announce an accommodative turn, it could trigger a real rally in the cryptocurrency markets.
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Fenelon L.
Passionate about Bitcoin, I want to explore the meanings of blockchain and cryptocurrencies and participate in my discoveries with the community. My dream is to live in a world where privacy and financial freedom are guaranteed for everyone, and I firmly believe that Bitcoin is the tool that can make this possible.
DISCLAIMER
The views, thoughts and opinions expressed in this article are solely those of the author and should not be relied upon as investment advice. Do your research before making any investment decisions.