- Danmarks Nationalbank today cut its key policy rate by 10bp to minus 0.75%.
- The move follows a 10bp rate cut from the ECB earlier today.
- For now, we look for the ECB to keep its policy rate unchanged and, therefore, we expect the key policy rate in Denmark to stay at minus 0.75% for 12M.
Danmarks Nationalbank today announced that it is cutting its key policy rate, the rate of interest on certificates of deposit, to minus 0.75%. It left the current account rate and the lending rate unchanged at 0.00% and 0.05%, respectively. Danmarks Nationalbank also kept banks' current account limit unchanged. The move follows the 10bp rate cut from the European Central Bank (ECB) announced earlier today.
The decision brings the key policy rate in Denmark back down to the recent record-low level of minus 0.75%. We do not look for further interest rate cuts from the ECB at present and, thus, we expect the key policy rate to stay at minus 0.75% for 12M.
On top of the 10bp rate cut, the ECB today also introduced a tiered deposit system. This could potentially hamper part of the pass through of the rate cut to market rates. Hence, there is a risk that the spread between DKK and EUR rates could widen further after today and the discount in EUR/DKK FX forwards could increase. This would in turn tend to push EUR/DKK higher. EUR/DKK ticked marginally higher following the announcement.
This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.