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Denmark’s central bank raised its key policy rate by 25 basis points to 3.60%. The rate hike follows the European Central Bank’s earlier decision to raise its policy rate by 25 basis points to 4.00%.
We expect this rate hike to mark the end of the rate hike cycle in the Eurozone and Denmark, with the next step being a rate cut in the summer of 2024.
EUR/DKK is close to the central exchange rate. We expect EUR/DKK to remain at this level and therefore the Danish Bank will follow the ECB’s future rate changes on a 1 to 1 ratio. That said, we do not expect the Danish Bank to unilaterally adjust the policy rate spread (currently -0.40pp). This means we expect the Danish Bank to keep its key policy rate unchanged at 3.60% until next summer.
