Denmark cuts interest rates to weaken the krone exchange rate – E24
Denmark does the opposite of Norges Bank and cuts the key policy rate.
The Central Bank of Denmark cuts its key interest rate by 0.1 percentage points to minus 0.6 per cent. The interest rate on loans is lowered correspondingly to minus 0.45 percent.
The central bank justifies adjustments with its foreign exchange purchases in Ukraine.
Denmark pursues a fixed exchange rate policy, and must keep the Danish krone close to 746 pr. 100 euros. The goal is to facilitate stable inflation.
The central bank uses tenants and currency purchases as tools.
Bought currency for 50 billion.
During 2021, the central bank has bought currency (and sold Danish kroner) for around 50 billion Danish kroner in trade, in an attempt to weaken the krone exchange rate, according to Bloomberg.
But it has turned out to be not enough, and the central bank is taking a new step here to get rates close to target, the news agency notes.
One Danish krone handles at 7.43 against the euro after decisions – unchanged from days before.
Denmark’s central bank does not hold calendar meetings as in Norway, and the interest rate decision came at 5 pm on Thursday afternoon.
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Expected previous cuts
Danske Bank had expected the central bank to resort to the interest rate weapon at an earlier stage, writes the Danish online newspaper Finans.dk.
The reason is that the Danish krone has been stronger lately.
– The interest rate was raised when the corona crisis began last year because there was financial turmoil and some pressure in the direction of a weaker krone. But now the corona crisis is to a certain extent over, and Danmarks Nationalbank has sold kroner in retail since February, says the bank’s Danish chief economist Las Olsen to the newspaper.