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Denmark’s interest rate at highest level since 2009

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Ritzau/The Local - [email protected]
Denmark’s interest rate at highest level since 2009
Denmark's Nationalbanken raised interest rates on September 14th 2023 for the tenth time since July 2022. Photo: Philip Davali/Ritzau Scanpix

Danmarks Nationalbank, the country’s central bank, has raised interest rates after the European Central Bank also raise its interest rate yesterday.

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Nationalbanken generally follows the ECB policy to keep the value of the krone tied to the euro.

The ECB’s decision to raise its own interest rate is related to stopping and reducing inflation in the eurozone. The latest increase – the tenth by the ECB since last year – could be the last for the time being, commentators have speculated.

Denmark’s latest raise means that interest rates on deposits at the Nationalbank are now at 3.6 percent, and 3.75 percent for loans. The rates are the highest Denmark has seen since 2009 and compare to interest rates that were under 0 percent just over a year ago.

“The interest button is glowing at the Nationalbank. For more than a year, the Nationalbank has pressed this button every time the ECB has done so,” senior economist Jeppe Juul Borre of Arbejdernes Landsbank said in a comment.

“This marks the tenth interest rate increase in a row. That’s quite hefty. But we believe that this is the last time for now,” Borre said.

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The ECB in July 2022 raised its interest for the first time since 2011. The decision was taken in response to inflation connected to rising energy prices and the Russian invasion of Ukraine.

The basic aim of interest rate increases is to bring inflation under control by reducing spending and increasing the incentive for saving.

Europe’s economy is considered by the ECB to still be showing enough signs of fragility for the interest rate to be pushed up again.

While inflation in Denmark is lower than in the eurozone countries, the need to keep the value of the krone matched to the euro outweighs the arguments for retaining a lower interest rate and the Nationalbank has therefore followed the ECB on each occasion it has raised interest.

“The interest rate will not be put up again. ECB expects that they have reached the peak interest and therefore this is also the end of interest rate raises from the Nationalbank,” Allan Sørensen, senior economist with the Confederation of Danish Industry, said in a written comment.

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