Thursday, December 15, 2011

Denmarks Nationalbank Cuts Rate Further 10bps to 0.7%

The Danmarks Nationalbank cut its key lending rate by 10 basis points to 0.70% from 0.80% and reduced the current account rate 5bps to 0.25%, effective from 16 December.  The Bank also cut rates on the 8th of December following the ECB rate cut, at that time it cut the lending rate 40bps to 0.8%, and reduced its other interest rates by 25 basis points.  The Bank said in its press release: "The interest rate reduction follows Danmarks Nationalbank's purchase of 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 weakened about 3% against the US dollar this year, and last traded around 5.71.


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