Danish Central Bank Cuts Rates to Protect the Krona

The Central Bank of Denmark, Nationalbanken, announced that it is reducing the current account interest rate from 2.85% to 2.6% to maintain the fixed exchange rate link of the krone to the euro. This decision, announced on Thursday, is seen as a move in line with the steps taken by the European Central Bank (ECB) to lower interest rates on the same day.

This latest adjustment marks the fourth reduction in borrowing costs for Denmark in 2023 and is considered part of a strategy to closely follow the ECB's monetary policy. Economists surveyed by Bloomberg News had unanimously predicted this move, anticipating that Denmark would maintain the interest rate differential with the ECB to uphold the fixed exchange rate of the krone.

The Danish krone is trading close to the central parity rate without the need for intervention from the Central Bank in the foreign exchange market. This consistent approach to monetary policy reflects Denmark's determination to protect its fixed exchange rate with the euro.