ECB Delivers First Rate Cut in 5 Years, Crypto Market Braces for Impact
On Thursday, European Central Bank (ECB) President Christine Lagarde announced a widely anticipated cut to the bank’s key interest rate.
The ECB trimmed rates by 25 basis points to 3.75%, the first rate reduction since September 2019. This indicates a shift in the central bank’s monetary policy stance after nine months of holding rates steady at a record 4%.
The rate cut decision was driven by an updated assessment showing an improved inflation outlook, with the ECB staff raising their 2024 headline inflation forecast to 2.5% from 2.3% previously.
We cut our key interest rates by 0.25 percentage points.
Keeping interest rates high for nine months has helped push down inflation.
It is now appropriate to moderate the degree of monetary policy restriction.
Read our monetary policy decisions https://t.co/AaaLd3hGEB pic.twitter.com/dTTYKg7itm
— European Central Bank (@ecb) June 6, 2024
Despite inflationary pressures in the 20-nation eurozone, the ECB stated that “it is now appropriate to moderate the degree of monetary policy restriction” based on the inflation dynamics and strength of policy transmission.
According to Dean Turner, chief eurozone economist at UBS Global Wealth Management, a follow-up cut is expected by September if deliberation in the next ECB meeting in July goes well.
“Inflation has been printing a little bit hotter than markets were expecting, but in terms of the timing of the next cut I’d still be looking to September,” Turner
Notably, the June rate cut puts the ECB ahead of the U.S. Federal Reserve in easing monetary policy, as the world’s largest central bank is still battling high inflation in the United States.
Other major central banks, such as the Bank of Canada, Sweden’s Riksbank, and the Swiss National Bank,
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