In order to maintain its currency peg, Denmark’s central bank has raised rates 0.25 per cent, matching the earlier increase from the ECB. Danish monetary policy is aimed at keeping the krone pegged to the euro. All four key rates were raised, now standing as follows:
Serbia also raised rates today, taking the highest rate in Europe 25bp higher to 12.5 per cent. The quarter point increase, announced before the ECB’s announcement, is the third this year, but represents a slowdown in tightening. Serbia has been raising rates since mid-2010, typically by half a point or a full percentage point, while the most recent two raises are smaller and follow a long pause.
Interest charged on certificates of deposit have been raised 10bp to 0.60 per cent by the Danish central bank. The current account rate has also been raised by the same amount, and now stands at 0.7 per cent. The lending and discount rates remain unchanged at 1.05 and 0.75 per cent, respectively.
The move was triggered by rising short-term market rates in the euro area. Danish monetary policy is aimed at keeping the krone pegged to the euro, which has recently been strengthening. Pegging the krone to the euro means that Denmark inherits euro area inflation.
Ireland’s done it. The UK’s about to do it. Now Denmark’s quite keen too.
Central bank director Nils Bernstein has said he’d like to see much closer co-operation with the Danish regulator, the FSA. ‘We can see a trend in Europe and internationally which involves some kind of fusion between central banks and financial regulatory authorities,’ he told financial daily Børsen (Danish, translation). ‘This could be advantageous for Denmark too.’ Read more
The Danish central bank cut its key lending rate by 10 basis points to 1.05 per cent to ease strengthening pressure on the krone, in a surprise move just a week after its last cut. The new rate is effective tomorrow.
Last week’s cut was also prompted by a strong krone. The bank changes interest rates to keep the krone in a narrow band to the euro and since “money-market rates in the euro are still very low … the spread to the equivalent Danish rates has tended to strengthen the Danish krone.” Today’s cut was explained as “a consequence of purchases of foreign exchange in the market,” suggesting the bank has intervened in forex markets to soften the currency. Read more
The Danish central bank agreed yesterday that, effective from today, various interest rates would be reduced by 0.05 percentage points to combat the strengthening of the Danish currency, saying: “The interest rate reduction is a consequence of purchases of foreign exchange in the market.”
The rates on certificates of deposit, the lending rate and the current account rate have all been trimmed. Key rates now stand as follows:
Denmark’s central bank has cut the lending rate from 1.25 per cent to 1.20 per cent and reduced the current account rate by the same amount, to 0.85 per cent. The bank has also cut rates on certificates of deposit from 1.00 per cent to 0.95 per cent, while the discount rate remains the same, at 1 per cent. The bank said the reduction was “a consequence of purchases of foreign exchange in the market”. The spread between ultra-low euro money-market rates and those on the Danish krone have tended to strengthen the currency.