Danish central bank director says cash help for high prices will cause inflation

Denmark’s economy risks overheating if the government follows through on plans to pay our cash assistance to parts of the population worst affected by high energy costs, according to the head of the central bank.

danish supermarket checkout
Denmark's government is considering additional financial help for parts of the population struggling with high prices. File photo: Signe Goldmann/Ritzau Scanpix

The governor of Denmark’s National Bank has come out against the government plan, asserting that the checks could accelerate inflation. 

“If compensation schemes are adopted that are not matched by public savings or higher taxes, this will put further pressure on the economy, pushing up wages and inflation,” National Bank director Signe Krogstrup told newspaper Berlingske. 

Subsidies are being considered for the unemployed and cash benefit recipients as well as the elderly.

Krogstrup’s reaction came as the government and political parties discuss which sectors of the population should receive a helping hand due to climbing everyday costs.

A payment of 6,000 kroner to over 400,000 households who face high energy bills is already scheduled for later in the year.

READ ALSO: Denmark boosts heating bill help and gives it to more households

The central bank director said that further government cash assistance may worsen the current situation by causing inflation to rise.

Some parties are in favour of extending cash help to additional groups, with the elderly the main focus of proposals so far. Students, the unemployed, and cash benefit recipients have also been mentioned.

Business minister Simon Kollerup said he did not think “targeted” cash assistance would worsen inflation.

The government wants to finance the packages by increasing public debt. This would require a deviation from the annual budget justified by extraordinary circumstances.

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Danish supermarket chains introduce price limits on selected products

Danish company Salling, which owns three supermarket chains, will place a limit on the price of selected products until later this year in response to inflation.

Danish supermarket chains introduce price limits on selected products

The high current prices of energy and many daily items for customers, caused by inflation, are behind Salling’s decision to introduce a price limit on some of its products, the company said in a statement on Tuesday.

Salling owns the Netto, Bilka and Føtex supermarket chains in Denmark. The prize freezes will apply at all three.

The limits, which will be in place until October, will be applied to “basic daily and food items”, according to Salling. Netto stores will see price limits applied to 100 products, while the larger Føtex and Bilka stores will have 200 products included.

Own-brand Salling products are likely to form the bulk of the lists, but the specific products were not named by the company.

The prices of the selected products “will not increase before October 28th despite ongoing, increasing inflation,” Salling said.

Although Salling expects inflation to continue, it said it wanted to give customers the option of preventing their spending on groceries from increasing by enabling them to choose products that have not gone up in price.

“We will make it easy for customers to navigate the products by communicationg prices clearly in our stores using signs and markings on shelves,” Salling CEO Per Bank said in the statement.

The move was described by Salling in the statement as an “investment” in light of expected higher costs at suppliers.

“It is just a year since Danes bought luxury items and flocked to supermarkets as a result of corona lockdowns and with extra holiday money in their pockets. Today, customers navigate by special offers and own brands as an alternative to name brands in Salling’s shops and stores,” the company said.

The company will announce on November 1st whether it will extend the limitation period, it said.