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Bank of England cuts interest rates to 4% amid rising inflation and slowing job growth.
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Crypto markets could benefit as central banks shift toward looser monetary policy.
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All eyes on the Fed’s September meeting, with rate cut odds even shooting above 93%.
The Bank of England (BOE) has cut its key interest rate once again, bringing it down to 4% from 4.25%. This marks the fifth rate cut since August 2024, when borrowing costs were as high as 5.25%.
BOE Governor Andrew Bailey called it a “finely balanced decision,” and confirmed that interest rates are still on a downward path. But the vote wasn’t smooth.
For the first time ever, the central bank’s Monetary Policy Committee had to vote twice. Four members opposed the cut, while five supported it – one of whom even pushed for a deeper cut to 3.75%.
So why the split? And when will the US follow suit?
Inflation Rises, Jobs Cool
The UK is currently seeing a mixed economic picture. Inflation rose to 3.6% in June, while unemployment increased to 4.7%. The BOE believes inflation will peak at 4% in September before slowly dropping to the 2% target by 2027.
But some aren’t convinced.
Households are already dealing with rising food prices, energy bills, and tax hikes and many are losing faith in inflation forecasts, especially after the sharp price increases of the past few years.
Despite that, the BOE plans to move “carefully and gradually”, aiming for small cuts every few months. Whether that pace continues will likely depend on how food inflation plays out in the coming weeks.
What Does This Mean for Crypto?
Rate cuts often trigger reactions in the crypto market – sometimes quickly, sometimes over time.
- Short-term volatility: Traders react quickly to rate cut news, often causing sudden price swings.
- Liquidity boost: Lower interest rates increase liquidity in financial markets, which supports riskier assets like crypto.
- Higher risk appetite: With lower returns on bonds and savings, investors tend to move towards assets like Bitcoin for better returns.
- Ecosystem growth: Low-rate environments encourage more venture capital investments into crypto startups and projects.
- Weaker dollar effect: Lower interest rates can weaken the US dollar, making Bitcoin more attractive as a store of value.
All Eyes on the US Fed Now
The big question: Will the Federal Reserve cut rates?
Signs are pointing that way. Minneapolis Fed President Neel Kashkari recently said the Fed may need to cut rates soon due to slowing growth and weaker job data. San Francisco Fed President Mary Daly agreed, warning that “waiting too long could be risky.”
According to the CME FedWatch Tool, chances of a rate cut in September climbed to over 93%.
Even politically, the pressure is rising. President Trump continues to push for aggressive rate cuts and is preparing to shape a new Fed that supports this view.
He will soon nominate a temporary replacement for Fed Governor Adriana Kugler, who steps down soon. The appointment is expected within the next two to three days, with the shortlist now narrowed to three candidates.
The Bottom Line
With the BOE cutting rates and the Fed possibly next, macro conditions are shifting fast. For crypto investors, this could mean a return to low-rate momentum, which has historically supported higher prices, increased investment, and faster ecosystem growth.
If the Fed does cut rates next month, we may be looking at a new phase for crypto!
