Persistent inflationary pressures in major economies are forcing central banks to maintain restrictive policies, clouding the outlook for risk assets including cryptocurrencies. Recent warnings from the Reserve Bank of Australia (RBA) and a new analysis from Rabobank on the euro area underscore that core inflation remains stickier than expected, likely delaying any pivot toward lower interest rates.
RBA Assistant Governor Luci Ellis, speaking at a Sydney conference, emphasized that underlying inflation—especially in services and domestically driven sectors—is not cooling fast enough. “Inflation persistence is still a significant issue,” Ellis said, noting uneven disinflation and upside risks. The RBA has held its cash rate at 4.35% since November 2023 and, based on Ellis’s remarks, markets now see rate cuts as unlikely until late 2025 at the earliest.
Meanwhile, Rabobank economists flagged similar dynamics in the eurozone, where core inflation stood at 2.9% in March despite an overall headline drop to 2.4%. Resilient wage growth and sticky services costs are keeping upward pressure on prices, threatening the ECB’s 2% target. “The ECB is walking a tightrope,” the report warned, indicating that premature easing could rekindle inflation while waiting too long would strain a fragile economy. Rabobank suggests any rate cuts are likely to come later and be more gradual than investors had priced in.
The combined message from Australia and Europe reinforces a global theme: central banks are not yet ready to declare victory over inflation. For the cryptocurrency market, which has shown heightened sensitivity to macro liquidity conditions, a prolonged period of high interest rates reduces the appetite for volatile assets. Bitcoin and other digital tokens often move inversely to real yields, and the absence of imminent rate cuts could cap near-term upside, even as long-term adoption trends remain intact.
Market participants now expect that both the RBA and the ECB will keep rates elevated through mid-2025, with only a shallow easing cycle thereafter. This macro backdrop may keep crypto trading ranges tight unless a clear catalyst—such as a regulatory breakthrough or a major institutional move—shifts sentiment.
