The latest data showed that the European Central Bank (ECB) has announced an interest rate cut of 0.25% today for the first time after 2019, fueling optimism in the global financial market, let alone the crypto sector. Notably, the ECB has previously hinted at a potential rate cut at their Frankfurt gathering today, as it reported progress in combating high inflation.
However, it’s worth noting that ECB officials also stressed that the fight is not over due to persistent service price inflation. Despite that, the recent decision has sparked discussions over a potential similar move by the U.S. Federal Reserve at their upcoming meetings.
ECB Announces First Rate Cut After 2019
In its latest meeting, the European Central Bank boosted market optimism with its latest announcement of a 0.25% cut in the interest rate to 4.25%. Meanwhile, the market was also anticipating a similar announcement from the ECB.
The ECB has increased the interest rate to 450 basis points between July 2022 and September 2023 to rein in the red-hot inflation. Meanwhile, the Euro Zone’s headline inflation peaked at 10.6% in October, while the higher rates have helped the ECB to bring down the prices to 2.6% in the last month.
Notably, the interest rates for the main refinancing operations, the marginal lending facility, and the deposit facility decreased to 4.25%, 4.50%, and 3.75%, respectively.
Although inflation has still stood at the top of the 2% target range of the bank, the substantial decrease, as noted in May 2024, has helped the authorities to cut down the policy rates. As per the latest ECB projections from March 2024, the average inflation is anticipated to fall to 2% by next year, and 1.9% in 2026.
On the other hand, the projection showed that the core inflation, excluding food and energy prices, is anticipated to decrease to 2.1% in 2025 and 2% in the following year.
Will the US Fed Follow Suit?
Inflation has been one of the major concerns globally, that has weighed on the investors’ sentiment so far, especially after the Covid-19 pandemic and other geopolitical turmoil. Now, with the ECB announcing its first rate cut in years, anticipation has soared over a similar move by the U.S. Federal Reserve.
Although the Federal Reserve remained skeptical with their policy rate plans, the latest CPI data indicates that the inflation is cooling. However, with the latest PCE data still remaining at 2.7%, higher than the Fed’s 2% target range, the lingering inflation rate casts a shadow on the Fed’s rate cut decision.
The post Breaking: ECB Cuts Rate Signaling Crypto Rally Ahead, US Fed To Follow Suit? appeared first on CoinGape.
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