Bitcoin price rises after Bank of Canada cuts interest rates below 5%

The Bank of Canada cut its benchmark interest rate for the first time in four years. This is a pivotal move that suggests other monetary authorities may soon begin doing the same.

This is good news for risky assets like Bitcoin, which have historically performed well when it is cheap to borrow money and when fiat money supply increases. After the news broke, Bitcoin surged 1.5% to $71,600, its highest since March. that much price of BTC It is pegged at $70,930 at the time of writing, according to CoinGecko data.

“We have come a long way in the fight against inflation,” Bank Governor Tiff McClem said in his opening remarks Wednesday. “And our confidence that inflation will continue to move closer to the 2% target has increased in recent months.”

By cutting Canada’s policy interest rate by 2 basis points from 5.0% to 4.75%, the country became the first G7 country to begin easing the fight against inflation that has swept the world during the COVID-19 pandemic.

In Canada, annual consumer price index (CPI) inflation fell from 8.1% in June 2022 to 2.7% in April 2024.

“We do not want to restrict monetary policy any more than necessary to bring inflation back to target levels, but lowering policy rates too quickly could jeopardize the progress made to date,” Macklem said. ”

The Swiss central bank, which had low inflation at 1.4% in April, led the world in cutting interest rates to 1.5% in March. Meanwhile, the European Central Bank (ECB) is expected to cut its key refinancing rate by 25 basis points to 4.25% at its next meeting tomorrow.

In contrast, U.S. inflation appeared tighter at 3.4% in April, raising suspicions that the Federal Reserve could keep interest rates high “for much longer.”

According to CME Fedwatch, markets still believe the Fed will keep interest rates on hold at its June meeting, but a 25 basis point cut by September is seen as the most likely outcome.

That said, the Fed cut the rate of its quantitative tightening program by more than 50% last month, which had the net effect of reducing the rate at which the Fed is taking money out of the economy.

“Tapering the QT while simultaneously increasing front-end speed can be similar to applying the brakes on a car and accelerating at the same time,” James Butterill, head of research at Coinshares, wrote in May.

Edited by Ryan Ozawa.