Friday, November 4, 2011

Danmarks Nationalbank Cuts Rate 35bps to 1.20%

The Danmarks Nationalbank cut its key lending rate by 35 basis points to 1.20% from 1.55%.  The Bank also cut the interest on certificates of deposit -35 basis points to 0.65%, the current account rate -35 basis points to 0.55%, and the discount rate -25 basis points to 1.00%.  The Bank said in its press release: "The interest rate reduction is a consequence of the reduction by the European Central Bank of its rate on the main refinancing operations by 0.25 percentage point to 1.25 per cent. Furthermore Danmarks Nationalbank has purchased foreign exchange in the market."

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 2.6% in August and 2.9% in July, compared to 3.1% in May, and 2.9% in April this year.  

The Bank also announced a new liquidity program last month.  The Danish economy grew at a year on year rate of 2% in Q2, compared to 1.7% in Q1 2011 (2.9% in Q4 2010).  The Danish krone (DKK) has strengthened about 3% against the US dollar this year, and last traded around 5.39.


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