With the eurozone facing the threat of a prolonged period of “low-flation”, the European Central Bank has been urged to stretch its monetary policy toolkit further and deploy more unconventional measures. One widely flagged option would be to cut the interest rate that banks receive for parking their money with the central bank to below its current zero level. Frankfurt would then replicate an experiment first tried by Denmark’s central bank, which in 2012 cut its deposit rate to -0.20 per cent.
As of Thursday, however, Denmark is no longer a valid comparison. The Danish National Bank has announced that, with effect from Friday, it will raise its deposit rate by 15 basis points to 0.05 per cent (it had already increased it to -0.10 per cent in January). Meanwhile, the central bankers in Copenhagen left the lending and the discount rate unchanged at 0.2 and 0 per cent respectively. Read more