Danish central bank increases interest rates

Unlike its neighbours, Sweden and the majority of Europe’s Central banks, Denmark‘s Nationalbank has suddenly increased interest rates by half a percent to 5.5 as the country flirts with recession.

The aim is to protect the Krone against the euro as it has fallen by 0.1 percent in the last week.

Having decided to stay outside the euro-zone, Denmark has closely followed the changed in interest rates from the European central Bank, however they do have a strong policy to retain the Danish currency.

Sweden cut its rates yesterday by 0.5 percent with a further cut of 0.25 percent expected in the next few weeks, whilst Norway have reduced their rates to 5.25 percent.

Denmark is having to make serious moves as it became the only European economy to enter a recession following two quarters of contraction and has responded by a 0.4 percent expansion in the last quarter.

The Danish Krone has lost value against the euro due to the large outflow of foreign-exchange from the country that has now resulted in the change in interest rates, as the increase means, that investors in the currency are now able to acquire higher making the Krone more favourable.

Despite the sudden hike in interest rates, the Danish central bank has announced that the discount rate and the current account rate remained at 4.5 percent.

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