We expect the ECB to keep rates unchanged at next Thursday's meeting. However, we also expect the ECB to signal a 25bp refinancing rate cut in December (see, Flash Comment: ECB expected to cut the refi rate in December).
If and when the ECB decides to cut the refinancing rate by 25bp, we expect Danmarks Nationalbank (DN) to cut the lending rate by 10bp to 0.10%.
Hence, DN will essentially copy the reaction from May when the ECB cut the refinancing rate by 25bp and DN followed with a 10bp lending rate cut.
Note that, on 10 April, DN stated: 'With low monetary policy interest rates, the room for further reduction of Danmarks Nationalbank's lending rate is limited. The lending rate will remain positive.'
In the very unlikely event that the ECB decides to cut both the refinancing rate and the deposit rate by 25bp, we expect DN to cut the lending rate by 10bp to 0.10% and the rate on certificates of deposits by 25bp to 0.35%.
If the ECB introduces a new LTRO, DN most likely will not follow. DN Governor Rohde said in September that DN believes there is liquidity in the financial system and that another infusion of three-year central bank loans will not be offered.
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DKK Nationalbanken Preview
Published 11/01/2013, 07:42 AM
Updated 05/14/2017, 06:45 AM
DKK Nationalbanken Preview
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