Denmark’s central bank raised its key interest rate by 0.5% points to minus 0.1%; following a rate hike earlier in the day by the European Central Bank (ECB).
Unlike most central banks, Denmark does not adjust rates to control inflation. Its sole mandate is to keep the crown currency within a narrow exchange rate band against the euro; an objective it upholds through currency interventions and interest rate moves.
The move could also help dampen the country’s overheated economy; characterised by low unemployment, high private consumption and a strong housing market.
This will have great significance for the Danish economy and especially the housing market; where we expect higher interest rates to result in falling prices during the autumn.
Denmark’s largest bank, Danske Bank (DANSKE.CO), said it would raise the variable interest rate on; personal and business customer deposits by 50 basis points as a consequence of the central bank move.
The current account rate, which is the benchmark rate, and the certificate of deposit rate were each raise by 50 basis points to -0.1% from -0.60% as of July 22, the central bank said in a statement. The lending rate was also raised by 50 basis points to 0.05%.