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- The value of bitcoin surpassed the $29k threshold, while ether’s price exceeded $1900.
- The European Central Bank (ECB) aims to bring policy rates closer to their 2% target.
The European Central Bank (ECB) raised key interest rates by 25 basis points (bps) during its meeting on May 4, indicating a slowing pace of policy tightening. In April, inflation in the Euro Area reached 7%, with the core rate remaining at a historic high of 5.6%.
In response to a similar 25 basis point increase by the U.S. Federal Reserve, the cryptocurrency market reacted favorably to the ECB’s decision. Bitcoin’s price surpassed the $29k mark, while ether’s value crossed over $1900. When central banks indicate a less aggressive approach to interest rate hikes, traders tend to adopt more optimistic positions.
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The Governing Council of the European Central Bank has increased interest rates for its three facilities—the main refinancing operations, the marginal lending facility, and the deposit facility—to 3.75%, 4.00%, and 3.25%, respectively.
Objective of Inflation Close to 2%
With inflation remaining elevated, the European Central Bank (ECB) seeks to align policy rates with their 2% goal. The central bank plans to maintain low rates for as long as necessary. Additionally, starting in July 2023, the Governing Council will cease reinvesting proceeds from the Eurosystem’s asset purchase program (APP).
Following the ECB’s interest rate increase, stock market indices dipped, and the Euro experienced a slight decline against the US dollar. The cryptocurrency market faced minor pressure as the DXY index rose from 101.11 to 101.57.
Nevertheless, optimism remains as Bitcoin showed positive movement. Christine Lagarde, president of the European Central Bank, has reiterated the institution’s dedication to curbing inflation. As previously stated, the intensity and duration of the restrictions will be guided by the data available.
