Danish Central Bank cuts interest rate

Denmark’s National Bank has announced a reduction in its key interest rate by 0.25 points to 2.85% after the ECB’s cut to 3.25%. This mirrors the ECB for the third time since June, with no reductions since 2019 before that. Analyst Jan Strørup Nielsen forecasts further cuts, suggesting a 2.25% rate by next April. Allan Sørensen from the Danish Industry (DI) states that, unlike the ECB which targets inflation, the Danish bank uses the rate to stabilize the krone against the euro. Reduced rates will benefit homeowners with adjustable-rate loans more so than savers. Denmark’s policy aims to maintain the currency’s euro peg despite different inflation pressures. There’s currently no pressure on the krone and slight expected winter inflation increases due to energy demands are not seen as a concern by the ECB, which is focusing on core inflation.