The uncertainty following the Italian election and the downbeat PMI figures in February have increased speculation that the ECB may decide to cut interest rates on Thursday, or at one of the following meetings.
The question naturally arises what the reaction from the Danish central bank (NB) will be in the case of an interest rate cut by the ECB.
Our main scenario for Thursday's ECB meeting is that the Governing Council will keep interest rates unchanged.
The EUR/DKK has been relatively stable and close to central parity over the past couple of weeks: hence, we do not expect any reaction from the NB if the ECB keeps interest rates unchanged.
If the ECB decides to cut, the most likely scenario will be a 25bp cut of the refinancing rate. In this case, we would expect NB to lower the lending rate by 10-15bp and keep all other rates unchanged.
In the more unlikely scenario where the ECB cuts both the refinancing and deposit rates by 25bp, we would expect NB to lower the lending rate and the rate on certificates of deposit by 25bp each.
To Read the Entire Report Please Click on the pdf File Below.
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DKK: Danish Central Bank Preview
Published 03/07/2013, 08:22 AM
Updated 05/14/2017, 06:45 AM
DKK: Danish Central Bank Preview
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