Denmark ends nearly a decade of negative interest rates

The Danish central bank, also known as the Danish Nationalbank, is seen in Copenhagen, January 22, 2015. REUTERS/Fabian Bimmer (DENMARK – Tags: BUSINESS)

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COPENHAGEN, Sept 8 (Reuters) – Denmark broke a nearly decade-long experience of negative interest rates on Thursday when its central bank raised its benchmark rate into positive territory, following a similar rate hike by its European counterpart Earlier in the day.

The central bank raised its key rate by 0.75 percentage points to 0.65%, its second rate hike in two months.

In 2012, Denmark became the first country in the world to impose negative rates, a trend adopted by other countries since to combat both low inflation rates and changing savings patterns. consumers and businesses. Read more

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Earlier on Thursday, the European Central Bank (ECB) again raised its benchmark deposit rate by 75 basis points to 0.75% and signaled further hikes. Read more

Unlike most central banks, the Danish central bank’s sole mandate is to maintain the stability of the krone currency against the euro, a goal it maintains through currency interventions and currency movements. interest rate.

Denmark’s central bank said in a statement that the rate hike was a consequence of the ECB’s increase.

“Rising interest rates are generally desirable for the Danish economy, which continues to balance itself on the verge of overheating,” Palle Sorensen, chief economist at Nykredit Bank, said in a research note.

The krone exchange rate remained stable following the central bank’s announcement.

Banks have struggled to adjust to the negative interest rate environment as they generate less profit on loans. As a countermeasure, most Danish lenders introduced negative interest rates on large customer deposits in 2019, a trend that is now reversing.

Denmark’s current account rate, which is the benchmark rate, and the certificate of deposit rate were each raised by 75 basis points to 0.65%, from -0.1%. The lending rate was also raised by 75 basis points to 0.8% from 0.05%.

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Reporting by Nikolaj Skydsgaard and Jacob Gronholt-Pedersen; edited by Stine Jacobsen and Jonathan Oatis

Our standards: The Thomson Reuters Trust Principles.

Leslie M. Gill