Friday, August 26, 2011

Denmark Central Bank Holds Lending Rate at 1.55%

The Danmarks Nationalbank held its key lending rate unchanged at 1.55% .  The Bank also reduced the interest on certificates of deposit -10 basis points to 1.10%, the current account rate -10 basis points to 1.00%, and held the discount rate at 1.25%.  The Bank said in its press release that "The interest rate reduction follows Danmarks Nationalbank's purchase of foreign exchange in the market.  The short euro market rates have fallen and the spread to the equivalent Danish rates has tended to strengthen the Danish krone."

Denmark's central bank last raised the lending rate by 25 basis points to 1.55% in July this year, after increasing the rate by 25 basis points in April this year, mirroring the interest rate increases by the European Central Bank (ECB).  The Danish Central Bank typically follows the moves of the ECB in order to keep its currency, the Krone, stable.  Denmark reported an annual inflation rate of 3.1% in May, up from 2.9% in April this year.  The Danish economy grew at a year on year rate of 1.3% in Q1 2011 (2.9% in Q4 2010).  The Danish krone has strengthened about 8% against the US dollar this year, and last traded around 5.16.


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