Bank of England 0.25% Rate Cut Stirs Potential Bitcoin Breakout
The Bank of England announced an interest rate cut of 0.25%, down to the 5% mark. This concludes one of the longest periods of heightened interest rates.
In an August 1st X post, the Bank of England announced the move to reduce interest rates. The ease was primarily driven by inflation, after it saw a monumental decline from 8% to 2% over the past year.
The Monetary Policy Committee voted by a majority of 5-4 to reduce #BankRate to 5%. Find out more: https://t.co/zBZeLlwSxD pic.twitter.com/YOcCTfER5o
— Bank of England (@bankofengland) August 1, 2024
This cut marks the bank’s first interest rate reduction in over four years, with the last cut occurring in March 2020.
The Bitcoin price could benefit from the surprise rate cut, as economists were divided on whether the bank would cut or hold rates steady.
While there may be room for a further ease below 5% later this year, possibly in November, the Bank of England governor wants to avoid cutting “too quickly or by too much.”
Notably, inflation is expected to creep back up from the target of 2% over the next few months.
Easing monetary policy has historically boosted risk on assets like Bitcoin and Gold, yet Bitcoin price remains range-bound.
The Bitcoin price remains subdued below the $65,000 mark despite the UK’s first rate cut in over four years.
The sluggish price action could be attributed to the United States Federal Reserve’s decision to hold its key lending rates steady in August.
However, Bitcoin price could see significant new liquidity and upward momentum with a US rate cut in September
According to CME’s FedWatch tool , traders hold an 86.5% chance that the central bank will lower its rate to 5.00% – 5.25% in September, down from the current 5.25% – 5.50%.
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