Bitcoin
Bitcoin price rises after Bank of Canada cuts interest rate below 5%
Canada’s central bank only reduced its benchmark interest rate for the first time in four years – a crucial move that suggests other monetary authorities may soon begin to follow suit.
This is good news for risk assets like Bitcoin, which have historically performed well when borrowing money is cheap and when the fiat currency supply is on the rise. After the news broke, Bitcoin rose 1.5% to $71,600, its highest price since March. O BTC price it reached $70,930 at the time of writing, according to data from CoinGecko.
“We have come a long way in the fight against inflation,” said Bank Governor Tiff Macklem during opening remarks on Wednesday. “And our confidence that inflation will continue to approach the 2% target has increased in recent months.”
The cut, which reduces the country’s policy rate by 2 basis points, from 5.0% to 4.75%, makes Canada the first G7 country to begin relaxing its fight against inflation, which has plagued the world during the COVID-19 pandemic.
In Canada, annual Consumer Price Index (CPI) inflation cooled from 8.1% in June 2022 to 2.7% in April 2024.
“We don’t want monetary policy to be more restrictive than necessary to get inflation back to target,” Macklem said. “But if we lower our policy interest rate too quickly, we could put the progress we have made at risk. ”
Switzerland’s central bank, where inflation was low at 1.4% in April, led the world with a interest rate reduction in March it fell to 1.5%. Meanwhile, the European Central Bank (ECB) is expected to cut its main refinancing rate by 25 basis points to 4.25% at its next meeting – what is tomorrow.
On the other hand, inflation in the United States proved to be more rigid, standing at 3.4% in April, raising suspicions that the Federal Reserve may maintain rates “higher for longer”.
According to CME FedwatchThe market still believes the Fed will keep rates unchanged at its June meeting, although a 25 basis point cut by September is seen as the most likely outcome.
That said, the Fed also reduced the rate of its quantitative tightening program by more than 50% last month, which has a net effect of reducing the rate at which the Fed withdraws money from the economy.
“Keeping front-end ratios high while decreasing QT can be compared to applying the brakes in a car and accelerating at the same time,” he wrote Coinshares Head of Research James Butterill in May.
Edited by Ryan Ozawa.