The Swiss National Bank (SNB) announced a 25 basis point cut in its benchmark interest rate on Thursday, bucking a global trend among other central banks to keep rates rising.
If others follow suit, this could be a promising signal for the cryptocurrency market, which has historically seen ebbs and flows depending on global macroeconomic policies.
The central bank explained its decision: “Inflation has returned to below 2% for several months, putting it within the range that the SNB equates with price stability.” Last February, the country’s inflation rate fell to 1.2%, and the central bank now projects average inflation rates of 1.4% in 2024 and 1.2% in 2025.
The Bank of Korea’s new base interest rate is 1.5%, lower than the 1.75% level it has maintained since June of last year. Prior to this, the bank raised the interest rate for one consecutive year from -0.75%, which had been maintained since January 2015.
Economists surveyed Reuters Initially, the central bank was expected to keep interest rates higher for several months. The surprise move sent Swiss government bond yields lower on Thursday, as well as the value of the Swiss franc against the euro and U.S. dollar.
The U.S. Federal Reserve (Fed) maintained its benchmark interest rate at 5.25-5.50% on Wednesday, and the European Central Bank (ECB) was expected to maintain its April interest rate at 4.5%. Inflation in each region remains above 2%, but both central banks are expected to start cutting interest rates sometime this year, possibly in June.
Bitcoin price peaked at $69,000 and then began falling for a year starting in November 2021, when the Federal Reserve announced its intention to raise interest rates to fight inflation. A slew of industry bankruptcies followed in 2022 as central banks embarked on one of the most intense tightening cycles in history.
Conversely, the price of Bitcoin surged from $3,500 to $64,000 in 13 months after the Federal Reserve lowered its benchmark interest rate to 0.25% in March 2020.
Nonetheless, some analysts believe that other macroeconomic factors are more important for the current Bitcoin price. Bitcoin prices have soared since early 2023 amid US bank failures, spot ETF approvals, and global liquidity shortages.
“Those who, when following the Treasury, focus too much on interest rate cuts, are now critical to a new era of fiscal governance.” wrote Will Clemente, co-founder of Reflexivity Research, took to Twitter (aka X) on Wednesday.
Just hours after the Federal Open Market Committee (FOMC) meeting ended on Wednesday, the price of Bitcoin surged back to $67,000.
Editors: Stacy Elliott and Andrew Hayward
