Denmark Just Followed Switzerland And Slashed Interest Rates As Europe Stagnates
REUTERS/Eric Miller
Both the deposit and lending rates were cut from -0.05% to -0.2%.
Like Switzerland, Denmark has been trying to keep up a currency peg against the euro, at around 7.46 Danish kroner to the euro.
Switzerland's central bank caused currency chaos last week, when it unexpectedly ended the peg and the Swiss franc soared in value. Since then, analysts have questioned whether Denmark will have to follow.
Societe Generale's FX man, Kit Juckes, thinks that's overblown (emphasis ours):
There has been significant speculation about the Danish currency peg to the euro following the SNB (Swiss National Bank) shock. We are doubtful that the Danish krone peg, which has existed for decades, is about to break. The DKK (Danish kroner) remained within the ERM (exchange rate mechanism) during the 1992 European currency crisis, even as the pound and the lira abandoned it. Unlike the CHF (Swiss franc), the DKK is not generally regarded as a global safe haven currency. Danish foreign reserves have actually declined by some 13% from their peak in mid-2012 after the passing of the European sovereign crisis, which implies a weakening of the pressure on DKK in recent years.
But like Switzerland, Denmark is importing deflation from the eurozone. Prices rose by just 0.3% in December, and there's going to be continued pressure on Denmark so long as the currency union's sluggish economic outlook continues, and with a likely QE programme coming on Thursday.
- I got a $40K raise using this 30-second strategy. It made me realize loud work, not hard work, always wins.
- Qatar Airways' new CEO explains why it's sticking with the Airbus A380 as other airlines retire the costly superjumbo
- Prince Harry and Meghan found out about Kate Middleton's cancer diagnosis on TV like everyone else, report says
- FPIs make remarkable comeback, infuse ₹2 lakh cr in FY24
- PM Modi and Bill Gates discuss AI, climate change, millets and more
- Consuming excessive salt and inadequate potassium, protein is making North Indians prone to life-threatening diseases: Study
- Upcoming cars and two-wheelers launching in India in April 2024
- Ice melt in Antarctica and Greenland is slowing Earth's rotation, affecting timekeeping: Study