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Bank of Canada Cuts Interest Rates: First G7 Nation to Ease Monetary Policy

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TLDR

The Bank of Canada (BoC) cut its benchmark interest rate by 25 basis points to 4.75%, becoming the first G7 nation to ease monetary policy.
The BoC’s decision suggests that other central banks might soon follow suit in relaxing their fight against inflation.
After the news broke, Bitcoin’s price rose 1.5% to $71,600, its highest since March, before settling around $70,930.
Canada’s annual Consumer Price Index (CPI) inflation has cooled from 8.1% in June 2022 to 2.7% in April 2024, although it remains above the BoC’s 2% target.
The European Central Bank (ECB) is expected to cut its main refinancing rate by 25 basis points to 4.25% at its next meeting, while the U.S. Federal Reserve may keep rates “higher for longer” due to stickier inflation.

The Bank of Canada (BoC) has become the first G7 nation to cut interest rates, a pivotal move that could signal a shift in global monetary policy.

On Wednesday, the BoC trimmed its key policy rate by 25 basis points, bringing it down to 4.75% from 5%. This decision marks the first rate cut in four years and is expected to ease pressure on highly indebted consumers in Canada.

The news of the BoC’s rate cut had an immediate impact on the cryptocurrency market, with Bitcoin’s price rising 1.5% to $71,600, its highest level since March.

Although the price has since settled to around $70,930, the move suggests that risk assets like Bitcoin could benefit from cheaper borrowing costs and an increased fiat money supply.

BoC Governor Tiff Macklem expressed confidence in the country’s progress against inflation, stating that the central bank does not want monetary policy to be more restrictive than necessary.

Canada’s annual Consumer Price Index (CPI) inflation has cooled significantly, dropping from 8.1% in June 2022 to 2.7% in April 2024. However, inflation remains above the BoC’s 2% target.

The BoC’s decision to cut rates makes Canada the first G7 country to begin relaxing its fight against inflation, which has been a global issue since the COVID-19 pandemic.

This move could pave the way for other central banks to follow suit.

The European Central Bank (ECB) is widely expected to cut its main refinancing rate by 25 basis points to 4.25% at its upcoming meeting, while Switzerland’s central bank and Sweden’s Riksbank have already implemented rate cuts.

In contrast, the United States may take a different approach due to stickier inflation. The U.S. Federal Reserve is expected to keep rates “higher for longer,” with the market believing that rates will remain flat at its June meeting. However, a 25 basis point cut by September is viewed as the most likely outcome.

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