Nationalbanken. Photo: gcbb/WikiCommons
Denmark's central bank Nationalbanken cut its deposit rate into negative territory on Thursday after the European Central Bank made a surprise cut in key interest rates to avoid deflation.
The deposit rate, which was below zero from July 2012 until April this year, was lowered to -0.05 percent from 0.05 percent.
The lending rate, the current account rate and the discount rate were kept unchanged.
"The interest rate reduction is a consequence of the reduction by the European Central Bank of its monetary policy rates by 0.10 percentage point," the Nationalbank said in a statement.
The deposit rate is the rate at which commercial banks are paid, or in this case have to pay, to place funds at the central bank.
Denmark's current monetary policy is aimed at maintaining a stable exchange rate between the Danish krone and the euro. The krone is pegged to the euro through an agreement known as the European Exchange Rate Mechanism (ERM II), under which the Danish currency can move only 2.25 percent up or down from a fixed rate of 7.46 krone per euro.