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To add fuel to the fire of excitement in the global financial market, let alone the cryptocurrency industry, the most recent data revealed that the European Central Bank (ECB) has announced a reduction in interest rates of 0.25% today, marking the first time since 2019 that this reduction has been disclosed.
It is important to note that the European Central Bank (ECB) mentioned the possibility of a rate cut during their meeting in Frankfurt today, as it highlighted progress in combating high inflation.
However, it is important to note that officials from the European Central Bank (ECB) also emphasized that the battle is not yet done because of the ongoing inflation of service prices. Despite this, the recent decision has prompted discussions over the possibility of the Federal Reserve of the United States taking a similar action during their next meetings, as per Coingape.
ECB Declares Its First Rate Cut Following the Year 2019
The European Central Bank's most recent announcement, which brought the interest rate down by 0.25% to 4.25%, increased market optimism during the central bank's most recent meeting. At the same time, the market was expecting the European Central Bank to make an announcement of a similar nature.
To bring the raging inflation under control, the European Central Bank (ECB) has raised the interest rate to 450 basis points between July 2022 and September 2023. The headline inflation rate in the Euro Zone reached its highest point of 10.6% in October, but the European Central Bank (ECB) has reduced prices to 2.6% in the most recent month thanks to the increased interest rates.
Particularly noteworthy is that the interest rates for the primary refinancing operations, the marginal lending facility, and the deposit facility all dropped to 42.5 percent, 4.5 percent, and 3.75 percent, respectively.
The large decline, observed in May 2024, has assisted the authorities in lowering the policy rates, although inflation has remained at the highest point of the bank's goal range of 2%. According to the most recent predictions by the European Central Bank (ECB), the average inflation rate is projected to decrease to 2.2% by the next year and then to 1.9% in 2026.
On the other side, the projection indicated that the core inflation rate, which does not include food and energy prices, is expected to decline to 2.2% in 2025 and then to 2% in the following year.
Will the Federal Reserve in the United States Follow Suit?
Because of the epidemic caused by the COVID-19 virus and other geopolitical unrest, inflation has been one of the most significant concerns worldwide, which has hurt investors' sentiment up until now.
With the European Central Bank (ECB) announcing its first rate decrease in years, expectations have skyrocketed over a similar move by the Federal Open Market Committee (FOMC) of the United States scheduled for the following week.
Even though the Federal Reserve has maintained its skepticism about its policy rate intentions, the most recent data from the Consumer Price Index (CPI) indicates that inflation is decreasing. The persistent inflation rate, on the other hand, casts a shadow over the Fed's decision to reduce interest rates. The most recent PCE data is still at 2.7%, which is greater than the Fed's target range of 2%.
Having said that, investors will be keeping a careful eye on the impending work statistics for the United States, which are due to be released tomorrow. Following that, attention will move to the Consumer Price Index (CPI) inflation statistics and the Federal Open Market Committee's (FOMC) interest rate decision in the following week.
The European Central Bank's decision skyrocketed the Euro-US Dollar by 0.18%. On the other hand, the yield on the 10-year US bond increased by 0.54%, while the average value of the US dollar index decreased by 0.07%.
A look at the cryptocurrency market reveals that the price of Bitcoin increased by 0.80% to $71,308.30, while the price of Ethereum increased by 1.37% to $3,857.54. Additionally, the total value of the global cryptocurrency market increased marginally to $2.64 trillion. In contrast, the market fear and greed index remained unchanged at 66, indicating investors are greedy about the market.
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