As the European Central Bank is on track with its inflation targets, the ECB is cutting interest rates again. Here's how Bitcoin and the crypto market react.

The European Central Bank wants to stimulate the economy and is therefore cutting interest rates. The ECB announced this on December 12 in a press release.

The central bank cut the deposit rate, which has a significant impact on lending and savings rates, by 25 basis points to 3.0 percent.

Experts had already expected this adjustment. The research team of the Landesbank Baden-Württemberg (LBBW) declared: "Declining inflationary pressures give the ECB room to cut its interest rates further. But it must remain cautious, as the battle against high inflation is not yet won."

The latest rate cut is justified by declining inflation. For 2027, ECB analysts forecast an inflation rate of 2.1 percent. In November, inflation in Germany was 2.2 percent compared to the same month a year earlier. With that, the ECB narrowly missed its inflation target of 2 percent.

During a press conference, Christine Lagarde explained, the ECB president, further explained monetary policy: "We are determined to stabilize inflation permanently at our target of 2 percent," Lagarde said.

An interest rate reversal, the so-called pivot, also took place in the US in September. Since then, the crypto market experienced a price rally, which was further reinforced by the election of Donald Trump. At the time of writing, Bitcoin is responding with a slight rise to over $101,000. However, this is not solely due to the ECB's decision.

Another important factor for Bitcoin's current strength is the release of the U.S. consumer price index for November on Dec. 11. This showed that prices were up 2.7 percent from a year earlier.

On December 18, the U.S. Federal Reserve will make another decision on interest rates. According to CME FedWatch, there is a 98.6 percent chance that this interest rate will also be cut by 25 basis points.