The Danish central bank reduced its interest rate on certificates of deposit by 10 basis points to negative 0.75%, effective Sept. 13.
Danmarks Nationalbank said the reduction follows the European Central Bank's decision to cut its deposit facility rate by 10 basis points to negative 0.50%. The Danish central bank's lending rate remained at 0.05%, while the current account and discount rates stayed at zero percent, with current account limits unchanged at a total of about 31 billion Danish kroner.
The rate cut points to a tightening of Danish monetary policy relative to that of the eurozone, wrote Rosie Colthorpe of Oxford Economics, adding that Danmarks Nationalbank had no other choice given the recent strengthening of the krone as well as the ECB's decision to restart net asset purchases.
"With the ECB's forward guidance changed today to indicate no rate hikes until it sees inflation converging to 2% in the medium term, Danish banks will be stuck with negative interest rates for the foreseeable future," said Colthorpe. Oxford Economics forecasts negative rates in Denmark to last until at least 2023.
As of Sept. 12, US$1 is equivalent to 6.76 Danish kroner.
