Central Bank warns against budget proposal

Danish Central Bank Director Christian Kettel Thomsen advises against relaxing fiscal policy as proposed in the government’s budget plan for 2025, citing current economic conditions. While employment continues to rise and pressure on the labor market has decreased since 2022 leading to low unemployment, it’s not an appropriate time for fiscal easing. Finance Minister Nicolai Wammen contends that a ‘responsible’ policy easing can be accommodated by 2025 when inflation is expected to settle around 2%. The Central Bank projects inflation at 1.3% for the current year, then 2.1% for 2025, and 1.8% for 2026, forecasting slowing wage increases due to lower market pressure and inflation. Growth expectations have been reduced slightly with a new prediction of 2.1% growth in 2023, compared to the previous 2.4%, and an anticipated growth for 2025 is at 2.3%.