In line with its current assessment, the Governing Council of the European Central Bank (ECB) believes that policy rates have reached a level which, if sustained for a sufficiently long period, will make an important contribution to the return of inflation towards the objective. In a press release published last Thursday, the Council increased three main ECB key rates by 0.25% in order to encourage this return of inflation towards the planned objective.
Eurozone economy slowing according to European Central Bank
As a result, financing conditions have tightened further. They are increasingly weighing on demand, which is a key element in bringing inflation back towards its objective. The ECB now forecasts a substantial contraction in eurozone economic growth, slowing to 0.7% this year and 1.0% in 2024.
Impact on the cryptocurrency market
Bitcoin jumps following ECB decision
The cryptocurrency market was influenced by this ECB announcement, notably Bitcoin, which jumped in response to the end of rate hikes. This reflects increased investor confidence in digital assets. These are still considered as an alternative to the uncertainties linked to the European monetary future.
List of cryptocurrencies affected by this announcement from the European Central Bank
- Bitcoin (BTC)
- Ethereum (ETH)
- Ripple (XRP)
- Litecoin (LTC)
- Bitcoin Cash (BCH)
The impact on traditional markets
The decision to end interest rate hikes also had an impact on traditional financial markets. Investors now expect bond yields to fall. This situation could make investments less attractive. But this will push market participants towards other alternatives, such as cryptocurrencies or gold.
The consequences for the eurozone in the long term
If the ECB succeeds in bringing inflation back to its target, this could have many positive consequences for the Eurozone and its member countries. Among them :
- Improved financial stability
- Strengthening economic growth
- Job creation
- Increase in consumer purchasing power
On the other hand, if inflation does not return to its target, the ECB could be forced to take more drastic measures to stabilize the economy. If so, this could have a negative impact on financial markets and exchange rates.
The ECB’s decision to halt interest rate increases has had significant repercussions. These were felt both on traditional financial markets and on the cryptocurrency market. This notably led to a significant increase in the price of Bitcoin. Investors will closely monitor developments in inflation and European monetary policy in the months to come. Also, they will keep an eye on the opportunities offered by digital assets.
