The Bank of Canada lowered its benchmark overnight rate by 25 basis points to 4.75% on Wednesday morning, as predicted. Since Canadian authorities had previously expressed satisfaction with the path of inflation coupled with some anxiety about slowing economic growth, most economists had anticipated the move.
“[It is] reasonable to expect further cuts to our policy interest rate” if inflation continues lower, said BoC Governor Tiff Macklem in prepared remarks following the decision.
Following the revelation, bitcoin (BTC) was trading at $70,500 at the time of publishing, without moving. After fighting for years to reduce inflation, the Bank of Canada (BoC) is the first of the G-7 central banks to start an anticipated cycle of looser monetary policy. At its meeting tomorrow, economists anticipate that the European Central Bank will loosen, making it the second major central bank to do so.
Furthermore, despite recent remarks from certain US Federal Reserve members that the bank would postpone rate reductions until 2024, recent economic data has shown slowdowns in inflation and economic growth. According to CME FedWatch, traders have presently priced in a nearly 60% possibility of a rate cut either before or during the Fed’s September meeting.
All other things being equal, riskier assets, like bitcoin, are typically negatively impacted by tighter monetary policy since higher interest rates increase competition for investor money. As a wave of lower interest rates appears to be approaching for Western countries, bitcoin bulls may soon be aiming for the cryptocurrency’s all-time high of $73,500, which was reached in March.