(Bloomberg) -- Denmark’s central bank delivered a quarter-point interest-rate cut to match its euro-area counterpart and defend the krone’s peg to the common currency.
Nationalbanken, which doesn’t hold scheduled meetings, lowered its current account rate to 3.10% from 3.35%, it said on Thursday, its second reduction this year. It comes after the European Central Bank reduced its key deposit rate by the same margin earlier in the day.
The move was expected by all economists surveyed by Bloomberg News, who saw a 1:1 match with the ECB as most likely, given the krone is trading close to its central parity rate and the Danish central bank hadn’t intervened in the currency market.
Palle Sorensen, chief economist at Nykredit, expects the Danish central bank will “follow the ECB one-to-one in the coming years.”
Nationalbanken usually mirrors the ECB on rates to maintain its currency peg to the euro, though it may deviate if the krone becomes too weak or strong. Since early last year, it has kept its benchmark rate 40 basis points lower than in the euro area, causing the krone to depreciate.
Jan Storup Nielsen, chief analyst at Nordea Bank Abp, expects the Danish officials to maintain this spread until end-2026. “If correct, that implies a Danish central bank deposit rate of 1.85% by end-2025,” he said.
The Danish central bank uses foreign currency interventions to steer the krone and typically only resorts to interest rate changes, for example by deviating from ECB rate decisions, if interventions become too big. Officially, the bank holds the krone within a 2.25% band of 7.46038 per euro, although in practice it aims for a narrower limit.
(Updates with analyst comments from fourth paragraph.)
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