Denmark's Central Bank Lowers Benchmark Interest Rate to 1.05%
14/01/2010 - Bloomberg.com
Jan. 14 (Bloomberg) -- Denmark's central bank lowered the benchmark interest rate by 0.1 percentage point to a record low, reducing the difference between Danish and euro area rates to counter the krone's strengthening against the single currency.
Nationalbanken, which uses monetary policy to keep the krone pegged to the euro, cut the lending rate to 1.05 percent, narrowing the spread to the European Central Bank's benchmark to 0.05 point, the Copenhagen-based bank said in a statement on its Web site. The bank doesn't hold scheduled meetings. The ECB left its main refinancing rate at 1 percent today, matching the forecasts of all 51 economists in a Bloomberg survey.
"We should be close to the bottom of the rate-cutting cycle but if we keep seeing significant currency inflows they might continue," said Jens Peter Soerensen, chief rate analyst at Danske Bank A/S.
Denmark's foreign currency reserves rose to 389.1 billion kroner ($74.9 billion) at the end of December, the second- highest level on record, the bank said on Jan. 5. A stronger krone allowed the bank to lower rates from an eight-year high in October 2008, helping the economy toward recovery from its worst recession in six decades.
The central bank's only mandate is to support the peg to the euro in a 2.25 percent band. The bank was forced to raise the key lending rate to 5.5 percent in 2008 after investors turned their backs on smaller markets, threatening the peg.
The krone traded at 7.4409 against the euro at 4:23 p.m. in Copenhagen, compared with 7.4400 at yesterday's close. The krone has strengthened from 7.4484 at the beginning of 2009.
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