Interest rate drops to record low

Central bank hopes the move will slow krone’s rise against euro

In an attempt to weaken the Danish krone, which has been gaining strength against the euro, DenmarkÂ’s central bank, Nationalbanken, decided on Thursday to lower the lending rate another 0.1 percent to a record-low of 0.7 percent.

The national interest rate is now approximately 0.30 percent below the European rate.

SydbankÂ’s senior economist, Jacob Graven, suggested that the central bank was running out of options for stabilising the krone against the euro.

“If the krone continues getting stronger than the euro, and the interest rate hits zero, Nationalbanken will have used up all of the traditional ammunition for securing the fixed exchange rate policy,” Graven told Politiken newspaper.

Graven added that if the latest rate reductions fail to have a braking effect, Nationalbanken could lower the interest rate to zero – or might try something more creative, such as printing money to weaken the Danish krone, or breaking its fixed exchange rate with the euro. The krone has been pegged to the euro at a rate of 7.45 kroner to one euro since 1999.

Foreign investors have been buying Danish government bonds at a brisk pace – to the tune of 69 billion kroner since September – on the presumption that the Danish economy is a ‘safe haven’ from the troubled Eurozone.

Another senior economist, Jens Nyholm from the bank Spar Nord, predicted that the Danish base interest rate would fall to 0.45 percent in January. But there’s no reason why it must stop there.

Nationalbanken’s chairman, Nils Bernstein, would not rule out the possibility that the national interest rate could even go below zero – a situation Sweden experienced between July 2009 and September 2010, when its interest rate fell to –0.25 percent.

A negative interest rate would force banks to circulate their money, explained economics professor Henrik Jensen from the University of Copenhagen.

“You can very well have a situation where Nationalbanken would put a negative interest on deposits from the country’s banks,” he told Politiken. “Then the interest is simply minus, so the banks get penalized for letting money sit in Nationalbanken.”

Danske BankÂ’s senior economist Steen Bocian told Avisen.dk that a near-zero national interest rate could translate into savings for Danish homeowners.

“Fundamentally, it means that it will be cheaper to loan money,” Bocian said. “Even though we are dealing with trifles here, it could produce some small savings with, for example, the variable rate mortgages. So, it could be a little bit easier to be a home owner or business owner.”




  • The internationals who created an app to make friends in Denmark  

    The internationals who created an app to make friends in Denmark  

    A team of young internationals has created an app that is helping their peers connect and build friendships in Denmark, addressing the challenges of social integration.

  • New documentary stirs debate in Denmark and Greenland 

    New documentary stirs debate in Denmark and Greenland 

    The documentary Greenland’s White Gold, reveals the worth of cryolite mining in Greenland to be in the billions. Over the years its value has been undermined, despite it acting like a gold mine for the Danish state. 

  • Today is 10 years from Copenhagen terrorist attack

    Today is 10 years from Copenhagen terrorist attack

    On February 14 and 15, the last terrorist attack took place in Denmark. Another episode occurred in 2022, but in that case, there was no political motive behind it

  • Enter Christiania: how the Freetown works

    Enter Christiania: how the Freetown works

    We all know Christiania and have been there at least once. But how does the Freetown work? How are decisions made? Can a person move there? Is there rent or bills to pay? British journalist Dave Wood wrote a reportage on Christiania for The Copenhagen Post.

  • The struggles of Asian women in Denmark’s labour market

    The struggles of Asian women in Denmark’s labour market

    Isha Thapa unfolds her research “An Analysis on the Inclusivity and Integration of South Asian Women in High-Skilled Jobs within the Danish Labor Market”. Thapa describes the systemic and social challenges these women face, ranging from barriers in social capital to cultural integration.

  • Parents in Denmark reject social media monitoring 

    Parents in Denmark reject social media monitoring 

    Most parents in Denmark reject using social media parental controls despite knowing about them. A new study questions the effectiveness of these tools in ensuring children’s online safety.