Breaking: ECB and Bank of England raise interest rates; Crypto Market Reacts
Thursday’s record-breaking rate of interest rate rises was slightly lowered by the European Central Bank (ECB), joining the U.S. Federal Reserve, and other central banks around world, in a push to combat inflation. The central banks of the United Kingdom, Switzerland, and the eurozone raised interest rates by 0.5 percentage point to combat high prices that are affecting consumers across the globe.
Rates Increase to 2%
The European Central Bank released a statement stating that it will increase its benchmark interest rate from 1.5% to 2%. This is the highest level since 2009. It stated that it expected to increase [rates] even more, as inflation is expected to remain above the norm for too long.
Read More: U.S. Fed Hikes Rate By 50 BPS As Per Expectation, Stocks Go Down
Officially, the ECB was quoted as saying,
The Governing council decided to increase interest rates today and expects to do so significantly more because inflation is still too high and is expected to remain above the target for too much time.
The banks’ global war against rising consumer costs has slowed significantly as inflation has fallen from its excruciatingly high levels.
More Rate Hikes Coming
However, policymakers insist that additional rate hikes are necessary to reduce inflation from the decade-high levels. They also need to combat rising costs for housing, food and energy that are ruining people’s savings.
Read more: Jerome Powell is Uncertain of the Future Economy
Investors believe that the major European central banks will raise interest rates more quickly than the U.S. Fed over the next 12 month. This is because the European inflation is reportedly more severe and persistent than elsewhere.
Crypto Markets React
The announcement yesterday of a 50 basis-point interest rate increase by the U.S. Federal Reserve caused the crypto market to crash along with the stock markets, wiping out all gains.
The market continued its downtrend after the ECB announcement, with signs that further slippage was possible due to weak resistance as indicated by technical indicators such as the Relative Strength Index.
Continue reading: Will Bitcoin (BTC), Price Pump or Dump This Weekend?
The current market capitalization of the largest crypto, Bitcoin, has fallen to $17.507 from $17.800. Ethereum, however, dropped from $1315 and $1275 in price. Within minutes of the announcement, both cryptocurrencies experienced a 1.2% drop in price.
Bitcoin and other major altcoins are under pressure due to back-to-back rate increases and have not been able to recoup their losses.
According to the market sentiment analyzer, Bitcoin Fear and Greed Index the indicator is gradually moving closer towards the “Extreme Fear”, which denotes a market state of brewing panic.
Also read: SEC Charges 8 Social Media Influencers in $100 Mn Stock Manipulation Scam
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