The Bank of England has cut its benchmark interest rate by 0.25 percentage points to 4%, marking the lowest level since March 2023. The decision, made on August 7 after a rare second-round vote of the Monetary Policy Committee, comes amid signs of economic slowdown in the UK, with GDP growth losing steam and unemployment rising.
A Historic and Divided Decision
The rate cut passed by a narrow 5-4 vote, underscoring deep divisions among policymakers. It is the first time in the BoE’s history that a decision required a second round of voting. While inflation remains above the 2% target, at 3.6% in June and expected to climb to 4% by September, officials cited the need to support the economy against tightening financial conditions.
Boost for Bitcoin’s Narrative
The move has been interpreted by many analysts as another validation of Bitcoin’s role as a global decentralized asset. In an environment where central banks are loosening monetary policy despite elevated inflation, investors often look to assets with fixed supply, such as Bitcoin, as a hedge against currency debasement. The rate cut contributed to renewed demand, helping push BTC prices higher alongside other recent pro-crypto developments, including the U.S. executive order opening the 401(k) market to digital assets.
Market Reactions and Outlook
Following the announcement, the British pound strengthened against the U.S. dollar, while UK equities saw mixed performance. In the crypto space, Bitcoin rallied further, with traders citing the BoE’s move as part of a broader global trend of monetary easing that supports risk assets. Market watchers believe continued rate cuts globally could accelerate Bitcoin’s adoption as a cross-border store of value, beyond traditional investment portfolios.
Source: Reuters, AP News, Barron’s
