Record low interest rates expected in Denmark after ECB decision

Denmark’s Nationalbank is expected to follow the ECB’s lead and announce an interest rate cut of its own to between 0.15%-0.25%, said Danske Bank.

This follows the ECB’s decision to cut its own key lending rates. The refinancing rate has been cut by 0.25% to a record low of 0.5%, and the marginal lending rate has been cut by 0.5% to 1%.

Denmark’s previous low lending rate was 0.2% seen in July last year. Currently it is at 0.3%.

“The interest rate cut does not change the serious situation facing the Danish economy,” said Jens Pedersen, economist at Danske Resarch.

“For a family with a [loan] a rate cut of 0.15% will result in a monthly saving after tax of DKK84 for each DKK1m borrowed. That is a small saving, which of course is welcome, but it is not enough by itself to turn around the economic situation Danish property owners currently face.”

Pedersen added that it is important to recognise the background to the ECB’s rate cut, which is the poor macroeconomic data coming out recently across the eurozone.

A struggling eurozone reduces export opportunities for Denmark, which in turn means lower growth in the country and a continued poor outlook for wages.

“Danes will be pleased by lower interest rates, but it is just a plaster on the wound, because the risk of becoming unemployed has increased recently.”

Denmark is not in the eurozone, but its currency, the DKK, is pegged to the euro in a way that others such as SEK or sterling are not.

 

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