We expect the European Central Bank (ECB) to keep policy rates unchanged at its Thursday meeting. In the unlikely scenario that the ECB cuts the refinancing rate by another 25bp, we would expect Danmarks Nationalbank (DN) to cut the lending rate by 10bp to 0.10%.
On April 10, 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 more unlikely scenario where the ECB cuts both the refinancing and deposit rates by 25bp, we expect the DN to lower the lending rate by 10bp to 0.10% and CD rate by 25bp to -0.35%. The EUR/DKK has moved higher since the beginning of June, and is now trading around the central rate of 7.46038. It has not triggered DN intervention.
DKK assets remained popular with foreign investors in May, and the DN has not needed to intervene in the FX markets to support the DKK since January.
As a rule of thumb, it takes around DKK10-20bn of intervention before an independent rate change from DN. Hence, an immediate unilateral DN rate hike is not on the cards.
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DN Expected To Lower Lending Rate By 10bp To 0.10%, CD By 25bp To -0.35%
Published 07/03/2013, 07:53 AM
Updated 05/14/2017, 06:45 AM
DN Expected To Lower Lending Rate By 10bp To 0.10%, CD By 25bp To -0.35%
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