The Bank of England’s recent decision to reduce interest rates has created a wave of positive momentum across cryptocurrency markets, with Ethereum, XRP, and Solana leading the charge. The central bank cut rates by 25 basis points to 4%, down from 4.25%, representing the lowest level seen since March 2023 and marking the fifth reduction since August.
BOE Implements Quarter-Point Rate Reduction
During their latest monetary policy meeting, the Bank of England’s Monetary Policy Committee voted 5-4 in favor of the rate cut, describing their strategy as a “gradual and careful” approach to policy adjustments. The central bank emphasized its commitment to addressing persistent inflationary pressures while working to bring inflation back to the 2% target over the medium term.
The MPC stated in their policy summary that they “set monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment.” They added that the committee “adopts a medium-term and forward-looking approach to determine the monetary stance required to achieve the inflation target sustainably.”
BOE Governor Andrew Bailey stressed the importance of taking a measured approach on Thursday, warning against implementing rapid successive rate cuts. The bank indicated that future reductions will depend on how underlying disinflationary pressures develop. Earlier this year, the BOE reduced rates to 4.5% in February, which was the lowest since June 2023, before cutting to 4.25% in May.
Digital Assets Rally Following Rate Decision
The cryptocurrency market responded enthusiastically to the BOE’s announcement, with the total market capitalization reaching $3.82 trillion, representing a 2.8% increase over the previous 24-hour period. Major digital assets experienced substantial gains, with Ethereum leading among the top ten cryptocurrencies with a 6.87% surge.
Good morning 🌞
The Bank of England just cut interest rates by 25bps to 4%, signaling a shift toward easing 💸 — and on the other side of the Atlantic, President Trump is set to sign an executive order allowing cryptocurrencies in 401(k) retirement plans 🇺🇸🪙
Traditional… pic.twitter.com/Lm5XTsgGMl
— Alpha Whale Crypto (@AlphaWhale_) August 7, 2025
Solana posted impressive gains of 5.7%, while XRP climbed 4.5% following the rate announcement. Dogecoin also participated in the rally, jumping 6.5% during the same timeframe. The positive market reaction reflects investor optimism about potentially looser monetary conditions.
George Brown, senior economist at Schroders, observed that while markets anticipated the rate cut, uncertainty remains regarding the central bank’s future direction due to mixed signals from employment, growth, and inflation data. This uncertainty reportedly led to an unusual two rounds of voting before the committee reached its final decision.
The BOE’s move contrasts with recent decisions by other major central banks, including the US Federal Reserve and Bank of Japan, which have maintained their current interest rate levels. The Bank of Japan kept its benchmark rate around 0.5% following a two-day meeting, similar to the Fed’s approach.
Some economists anticipate additional rate reductions ahead. Ashley Webb, UK economist at Capital Economics, previously suggested that “the Bank of England will cut interest rates from 4.25% now to 3.00% in 2026, which would take rates below the low of 3.50% priced into the financial markets.”
Broader Economic Implications
Despite the immediate positive market reaction, the underlying economic uncertainties that influenced the close MPC vote suggest potential volatility ahead. The conflicting economic indicators that made this decision challenging could continue to create uncertainty in both traditional and digital asset markets.
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