Is the rate cut rally starting? Canada, Europe to follow, and when will the U.S. cut rates?

The Bank of Canada lowered its benchmark interest rate by 0.25% for the first time since 2020. Arthur Hayes, co-founder of global cryptocurrency exchange BitMEX, commented: “The Bank of Canada cut rates today. The European Central Bank (ECB) is also expected to cut rates today. This summer is shaping up to be more interesting than expected." Lowering interest rates can increase liquidity in the market, which means more money can flow into the cryptocurrency market, which is often categorized as a risky asset. While we don't know if this was a result of the rate cut, BTC ETF inflows were also strong on the day.

In a staggered move, the European Central Bank (ECB) fulfilled his prediction and cut its benchmark interest rate by 25 basis points to 4.25% from 4.50% on June 6th. The deposit rate was also lowered to 3.75% from 4.00%.

This is the first change in direction in more than two years after it began raising rates in July 2022, and the first rate cut since March 2016, eight years and three months. The ECB said the move “takes into account the slowdown in growth in the European economy and the trend towards stabilizing inflation,” adding, “The aim of the rate cut is to stimulate consumption and investment in Europe and support the economic recovery.”

Meanwhile, U.S. banking giant Bank of America (BofA) said in a recent report that it expects the U.S. Federal Reserve (Fed) to begin lowering its benchmark interest rate in September, with two rate cuts expected within the year. "Upcoming data releases will tell the Fed that the US economy is deteriorating. However, the Fed will not cut rates until it sees clear evidence of easing inflation, so rates are likely to remain unchanged at the June 24 (local time) Federal Open Market Committee (FOMC) meeting."