Flash comment Denmark: End of the hiking cycle

ECB increased its key policy rate 25bp earlier today.Danmarks Nationalbank (DN) hiked its key policy rate 25bp to 3.60% after the
We expect the rate hikes today to mark the end of the hiking cycle in the euro area and in Denmark and next move to be a rate cut in the summer of 2024.
EUR/DKK trades close to the central rate and we thus look for DN to follow future ECB rate changes 1-to-1 and keep the policy rate spread at -0.40pp.

Danske Research Team Danske Bank A/S

Danmarks Nationalbank (DN) just announced it hiked its key policy rate 25bp to 3.60%. The rate increase follows the decision by the ECB earlier today, which increased its policy rates 25bp to 4.00%.

We expect the hike today to mark an end to the hiking cycle. Although inflation remains elevated in the euro area, it will likely drop close to 2% next year, which should pave the way for interest rate cuts starting next summer.

EUR/DKK trades close to the central rate. We expect it to stay here and thus for DN to follow future interest rate changes from the ECB 1-to-1. I.e. we do not expect DN to make any unilateral adjustments of the policy rate spread, which is currently -0.40pp. It means we expect DN to keep its key policy rate unchanged at 3.60% until next summer

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Danske Research Team

Danske Bank A/S

Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.

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