The United Kingdom Central Bank has followed the Federal Reserve in the event of a sudden fall in interest rates – particularly since 2009.
As various news sources, including the Financial Times, reported on March 11, the Bank of England (BoE) said the move was a direct response to the economic pressure of the ongoing coronavirus outbreak.
The publication quoted a statement as follows:
“The reduction in bank interest rates helps to support business and consumer confidence at a difficult time, to support the cash flows of businesses and households and to reduce costs and improve the availability of financing.”
The move brings the basic BoE rate to only 0.25%, a reduction of 0.5%. The Fed rate is now 1.25%, with more cuts predicted this year.
The pound reacted immediately and lost 0.5% against the US dollar and then recouped part of the losses.
Although Bitcoin (BTC) did not respond, supporters of the cryptocurrency claim that stimulating spending and borrowing by lowering rates is just one practice that lays the foundation for the long-lasting downfall of the fiat economy.
To prevent recessions, a major fear of Keynesian economists, governments are striving to increase their spending while at the same time applying incentives such as corporate tax cuts.
Extra spending against a background of less income can only take place through the use of measures such as increasing the money supply and further downgrading of fiat currencies.
Bitcoin’s mild reaction to the coronavirus crisis nevertheless surprised many. Among them was John Bollinger, the creator of the Bollinger Bands trading indicator, who said on Tuesday that recent losses were unexpected.
“Bitcoin fell victim to the panic of COVID-19. I really didn’t see that coming, I thought it could act as a safe haven, “he tweeted.
In another message, he added:
“Safe harbor is a matter of perception, not a fact. If an asset is thought to be a safe haven, so is it. The case is completely psychological. “
BTC / USD traded at around $ 7,870 at the time of printing, a fall of 0.4% on the day after a short rise above $ 8,000.
As various news sources, including the […]