Danske Bank expects ECB rate cuts, negative Danish rates tomorrow

Danske Bank believes the Danish central bank will introduce a negative rate on deposits tomorrow, following an ECB meeting that consensus says will see cuts to its rates.

Danske has joined the consensus expecting the ECB to cut its key refinancing rate by 0.25% to 0.75% – the lowest level in the history of the euro.

Unemployment is at a record high of 11.1% across the monetary union, inflation is falling and recession is now a reality, according Anders Lumholtz, senior analyst at Danske.

At the same time Danske expects the ECB to announce another LTRO within months, although it could happen as soon as the pending July meeting.

The bank expects the ECB to cut its deposit rate by 10bps to 0.15%, but added that there is less consensus on this in the market, with a range of outcomes from no change up to a 25bps cut.

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